fertilizer use, with the latter increasing when the former does. But the pace of increase in nitrogen levels in fertilizer varies, depending on the level of input subsidies.

We further examine the relationship between input subsidies and fertilizer nitrogen levels in table 4. The log of applied nitrogen fertilizer is the dependent variable, and all independent variables are also in log form, allowing us to interpret the estimated coefficients as elasticities. Results with country-fixed effects and additional cell-level characteristics are shown in columns 2 and 3. According to the estimated coefficients in column 3, raising input subsidies by 10 percent results in a 3.1 percent increase in nitrogen fertilizer use.

Next, we investigate whether there are heterogeneities between richer and poorer areas in the subsidiesfertilizer relationship. We define these as the areas within each country whose GDP per capita values are below (poorer) or at or above (richer) the country’s median. The results in column 4 show that the relationship between input subsidies and nitrogen levels in fertilizer is stronger in richer areas. Specifically, richer areas see a 4.7 percent greater increase in nitrogen fertilizer levels from a 10 percent increase in subsidies than poorer areas. In turn, these higher increases in fertilizer use can have environmental consequences on soil and water pollution.

To examine the extent to which subsidies can impact groundwater quality, we use spatially disaggregated data on nitrate stored in the vadose (unsaturated) zone from Ascott et al. (2017). Before pollution can be detected in groundwater, contaminants that accumulate in the subsurface spread vertically and laterally in the vadose zone, long before reaching the water table. As such, the amount of stored nitrate here provides a first glimpse into likely impacts on groundwater pollution over time.

Table 5 first examines the impact of increased nitrogen fertilizer use on nitrate storage in the vadose zone. Again, since we express fertilizer and soil nitrate values in logs, we can interpret the estimated coefficients as elasticities. Columns 1 and 2 demonstrate that a rise in nitrogen fertilizer use correlates with a rise in nitrate storage in the vadose zone, whether or not we account for country-fixed effects. The results are robust when we also consider land elevation and CTI, with the estimated coefficients in column 3 suggesting that increasing nitrogen fertilizer use by 10 percent would result in a 2.9 percent increase in nitrate storage in the vadose zone.

Finally, we examine the role of subsidies in amplifying this expected impact by distinguishing between areas with high and low input levels (that is, where subsidy inputs are above or below each country's median). Column 4 shows that, in regions with high input subsidy levels, a 10 percent increase in fertilizer use causes a 5.7 percent greater increase in nitrate stored in the vadose zone. As a result, increased fertilizer use due to a rise in input subsidies can have an even stronger impact on groundwater pollution in areas with high subsidy levels. This shows that subsidies are exacerbating environmental degradation by incentivizing the use of nitrogen fertilizers beyond efficient levels.

# **7 Conclusions**

Our global empirical analysis provides evidence of the spatial distribution of output and input subsidies in the agriculture sector. Using a generous definition of what would be considered “progressive”, we find 11