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Abstract
Many of the ‘new’ agricultural input subsidy programs (ISPs) in sub-Saharan Africa
include among their objectives raising farm incomes and reducing rural poverty, but
there is a dearth of empirical evidence on whether ISPs are achieving these
objectives. Focusing on the case of Zambia, where ISPs account for approximately
50% of all agricultural sector poverty reduction program expenditures, we use
nationally-representative panel survey data to estimate the effects of ISP fertilizer on
smallholder farm household incomes, poverty incidence, and poverty severity based
on the US$2 and US$1.25/capita/day poverty lines. Panel data (fixed effects and
correlated random effects) and instrumental variables/control function methods are
used to correct for the potential endogeneity of subsidized fertilizer to household
incomes and poverty status. Results suggest that although ISP fertilizer raises
incomes, the increase is not large enough or widely distributed enough to
substantively reduce poverty incidence or severity among smallholder farm
households in Zambia.