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Abstract

Fertilizer subsidy program is one of the most well-known and politically sensitive policies in Sub-Saharan countries. Countries such as Malawi, Nigeria, Ghana and Ethiopia are characterized by large funded fertilizer subsidy programs in recent years. Malawi, Ghana and Nigeria administer a targeted input subsidy program (e.g. fertiliser voucher program), while Ethiopia uses a universal subsidy program where the government imports fertilizer and distributes it among farmers at below-market price through the network of cooperative unions. These two programs, highly discussed in the literature, often raise a debate. This paper aims at contributing to this discussion by assessing the likely impacts of these two fertilizer subsidy programs (flexible and targeted programs) on the productivity and food security of Ethiopian smallholder farmers. A novel farm-household model, FSSIM-Dev (Farm System Simulator for Developing Countries), is used to test both programs as well as to assess their production, consumption and welfare effects on a nationally representative sample of farm households in Ethiopia.

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