Resource information
While the economic returns to using
chemical fertilizer in Africa can be large, application
rates are low. This study explores whether this is due to
missing and imperfect markets. Results based on a panel
survey of Ethiopian farmers suggest that while fertilizer
markets are not altogether missing in rural Ethiopia, high
transport costs, unfavorable climate, price risk, and
illiteracy present formidable hurdles to farmer
participation. Moreover, the combination of factors that
promote or impede effective fertilizer markets differs among
locations, making it difficult to find a single production
technology that is uniformly profitable -- perhaps
explaining the inconsistency between field studies finding
large returns to fertilizer use in Ethiopia and survey-based
studies finding fertilizer use to be uneconomic. The results
suggest that households with greater stores of wealth, human
capital and authority can overcome these hurdles. The
finding offers some encouragement, but also implies a
self-enforcing link between low agricultural productivity
and poverty, since low-asset households are less able to
overcome these problems. The study suggests that the
provision of extension services can be effective and that
lowering transport costs can raise the intensity of
fertilizer use by lowering the cost of fertilizer and
boosting the farmgate value of output.
