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Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya

46 Pages Posted: 3 Jul 2009  

Esther Duflo

Massachusetts Institute of Technology (MIT) - Department of Economics; Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Bureau for Research and Economic Analysis of Development (BREAD)

Michael Kremer

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER); Center for Global Development; Harvard University - Harvard Kennedy School (HKS)

Jonathan Robinson

University of California, Santa Cruz

Multiple version iconThere are 2 versions of this paper

Date Written: June 26, 2009

Abstract

While many developing country policymakers see heavy fertilizer subsidies as critical to raising agricultural productivity, most economists see them as distortionary, regressive, environmentally unsound, and argue that they result in politicized, inefficient distribution of fertilizer supply. We model farmers as facing small fixed costs of purchasing fertilizer, and assume some are stochastically present-biased and not fully sophisticated about this bias. Even when relatively patient, such farmers may procrastinate, postponing fertilizer purchases until later periods, when they may be too impatient to purchase fertilizer. Consistent with the model, many farmers in Western Kenya fail to take advantage of apparently profitable fertilizer investments, but they do invest in response to small, time-limited discounts on the cost of acquiring fertilizer (free delivery) just after harvest. Later discounts have a smaller impact, and when given a choice of price schedules, many farmers choose schedules that induce advance purchase. Calibration suggests such small, time-limited discounts yield higher welfare than either laissez faire or heavy subsidies by helping present-biased farmers commit to fertilizer use without inducing those with standard preferences to substantially overuse fertilizer.

Keywords: technology adoption, hyperbolic discounting

JEL Classification: D03, O12, O33

Suggested Citation

Duflo, Esther and Kremer, Michael and Robinson, Jonathan, Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya (June 26, 2009). MIT Department of Economics Working Paper No. 09-19. Available at SSRN: https://ssrn.com/abstract=1427446 or http://dx.doi.org/10.2139/ssrn.1427446

Esther Duflo (Contact Author)

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National Bureau of Economic Research (NBER)

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Michael R. Kremer

Harvard University - Department of Economics ( email )

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Brookings Institution

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National Bureau of Economic Research (NBER) ( email )

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Jonathan Robinson

University of California, Santa Cruz ( email )

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