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# **I Introduction**

Chemical fertilizers are among the most consequential intermediate inputs in the global economy: they have dramatically increased productivity in agriculture, a sector that accounts for 40 percent of employment worldwide.<sup>1</sup> As most countries depend on imports to meet their fertilizer needs (Farrokhi and Pellegrina, 2023), trade restrictions and geopolitical conflicts – such as the 2022 Russian invasion of Ukraine and the 2026 US-Iran war – can cause large-scale disruptions to fertilizer access.<sup>2</sup> The effects of fertilizer availability are studied by a vast literature that focuses on estimating precise elasticities to small, localized shocks using field experiments (Beaman et al., 2013; Duflo et al., 2011). By contrast, the consequences of large-scale disruptions to fertilizer access remain poorly understood (Bergquist et al., 2023; Muralidharan and Niehaus, 2017).<sup>3</sup> Such disruptions can trigger sizeable general equilibrium (GE) adjustments in wages and prices, that are shaped by an economy’s structural features and pre-existing policies such as fertilizer subsidies—adjustments that lie beyond the reach of field experiments. Because observable variation in economy-wide fertilizer access has historically been limited, identifying the effects of such large-scale supply disruptions has remained an elusive empirical challenge.

This paper quantifies the economy-wide costs and distributional effects of restricted fertilizer access by exploiting a unique natural experiment in Sri Lanka: the abrupt ban on imports of chemical fertilizers in May 2021. Sri Lanka is a developing country heavily reliant on agriculture and home to one of the world’s largest fertilizer subsidy programs.<sup>4</sup> Since over 90% of the country’s chemical fertilizer was imported and viable organic alternatives were virtually nonexistent, the import ban created an economy-wide shock— effectively triggering a sudden, nationwide disruption in the supply of a critical production input.<sup>5</sup> This trade policy shock provides a rare opportunity to rigorously quantify the effects of large-scale fertilizer shortages and shed light on the importance of GE adjustments.

Our analysis proceeds in four steps. In the first step, we leverage a rich set of novel data sources 1Chemical fertilizers are shown to significantly boost crop yields, often by up to 50% in temperate settings (Stewart and Roberts, 2012). FAO (2025) reports that two out of every five employed individuals worldwide worked in the agrifood sector in 2022.

2More than 80% of countries rely on imports for 75% or more of their fertilizer needs —a consequence of highly concentrated global production: just five countries account for more than 60% of fertilizer nutrient output worldwide, while ten countries control 95% of the global supply of potassium, a key fertilizer nutrient (U.S. Department of Agriculture, Foreign Agricultural Service, 2022). The Global Trade Alert database described in Evenett and Fritz (2020) documents an increase in fertilizer import bans across countries from 0 in 2019 and 4 in 2020 to 61 in 2022.

> 3Besides scale, another difference between field experiments and large-scale access disruptions is that the former target agents who are initially _not_ using fertilizer, whereas the latter affect agents who _are_ initially using it, and who may thus value it more (by a revealed preference argument). These effects need not be symmetric.

4Sri Lankan subsidies covered 78–83% of the world price (Kishore et al., 2021) and accounted for 53.6% of agricultural spending in 2020 (Weerahewa et al., 2021).

> 5https://www.fao.org/4/ag120e/AG120E12.htm. The stated aim of the ban was a shift to organic farming; the unstated aim was to save foreign exchange.