Incomplete Markets and Fertilizer Use : Evidence from Ethiopia

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 w...

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Main Authors:	Zerfu, Daniel, Larson, Donald F.
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCESS TO CREDIT AGRICULTURAL ECONOMICS AGRICULTURAL EXTENSION AGRICULTURAL INNOVATIONS AGRICULTURAL MARKET AGRICULTURAL MARKETING AGRICULTURAL MARKETS AGRICULTURAL OUTPUT AGRICULTURAL PRACTICES AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTION SYSTEMS AGRICULTURAL PRODUCTIVITY AGRICULTURAL RESEARCH AGRICULTURAL SYSTEMS AGRICULTURAL TECHNIQUES AGRICULTURE ASYMMETRIC INFORMATION BANKS BARLEY CEREAL CROPS CEREAL YIELDS CHEMICAL FERTILIZER CHEMICAL FERTILIZERS CLIMATE CLIMATES COMMERCIAL BANK COMMERCIALIZATION COOPERATIVES CREDIT EXTENSION CREDIT MARKETS CREDIT PROVISION CREDIT-WORTHINESS CROP CROP AREA CROP CHOICE CROPLAND CROPS DOWN PAYMENT DUNG ECOLOGICAL ZONE ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY EMPLOYEE EXPENDITURES FALLOWING FAMILIES FARM FARM HOUSEHOLD FARM MANAGEMENT FARM SIZE FARMER FARMERS FARMING FARMING HOUSEHOLDS FARMING METHODS FARMS FERTILIZER FERTILIZER APPLICATION FERTILIZER APPLICATIONS FERTILIZER CONSUMPTION FERTILIZER COST FERTILIZER DISTRIBUTION FERTILIZER MARKET FERTILIZER PRICES FERTILIZER RESEARCH FERTILIZER USE FERTILIZERS FINANCES FINANCIAL MARKETS FOOD DEMAND FOOD POLICY FOOD REQUIREMENT FOOD SECURITY GOVERNMENT POLICY GRAIN GRAIN MARKET GREEN REVOLUTION GROWING SEASON HUMAN CAPITAL IFPRI ILLITERACY INFORMAL LENDERS INTERNATIONAL BANK LABOR MARKET LABOR MARKETS LACK OF CREDIT LAND MARKETS LOAN MAIZE MAIZE PRODUCTION MANURE MARKET DEVELOPMENT MICRO-LENDING MICROFINANCE ORGANIC FERTILIZERS PESTICIDES PHOSPHATE PHOSPHATE FERTILIZERS PRICE VOLATILITY PRODUCE PRODUCTION TECHNOLOGIES PRODUCTIVITY GROWTH PROFITABILITY RAPE REPAYMENT REPAYMENT SCHEDULES SAVINGS SEED SEED TECHNOLOGY SEEDS SMALLHOLDER SMALLHOLDER FARMERS SOIL FERTILITY SOIL QUALITY SOIL TYPE SOILS SORGHUM TRADITIONAL SEEDS TRANSACTION COSTS UNION UREA VILLAGE VILLAGES WHEAT
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100310104103 http://hdl.handle.net/10986/3721

id	okr-10986-3721
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spelling	okr-10986-37212021-04-23T14:02:12Z Incomplete Markets and Fertilizer Use : Evidence from Ethiopia Zerfu, Daniel Larson, Donald F. ACCESS TO CREDIT AGRICULTURAL ECONOMICS AGRICULTURAL EXTENSION AGRICULTURAL INNOVATIONS AGRICULTURAL MARKET AGRICULTURAL MARKETING AGRICULTURAL MARKETS AGRICULTURAL OUTPUT AGRICULTURAL PRACTICES AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTION SYSTEMS AGRICULTURAL PRODUCTIVITY AGRICULTURAL RESEARCH AGRICULTURAL SYSTEMS AGRICULTURAL TECHNIQUES AGRICULTURE ASYMMETRIC INFORMATION BANKS BARLEY CEREAL CROPS CEREAL YIELDS CHEMICAL FERTILIZER CHEMICAL FERTILIZERS CLIMATE CLIMATES COMMERCIAL BANK COMMERCIALIZATION COOPERATIVES CREDIT EXTENSION CREDIT MARKETS CREDIT PROVISION CREDIT-WORTHINESS CROP CROP AREA CROP CHOICE CROPLAND CROPS DOWN PAYMENT DUNG ECOLOGICAL ZONE ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY EMPLOYEE EXPENDITURES FALLOWING FAMILIES FARM FARM HOUSEHOLD FARM MANAGEMENT FARM SIZE FARMER FARMERS FARMING FARMING HOUSEHOLDS FARMING METHODS FARMS FERTILIZER FERTILIZER APPLICATION FERTILIZER APPLICATIONS FERTILIZER CONSUMPTION FERTILIZER COST FERTILIZER DISTRIBUTION FERTILIZER MARKET FERTILIZER PRICES FERTILIZER RESEARCH FERTILIZER USE FERTILIZERS FINANCES FINANCIAL MARKETS FOOD DEMAND FOOD POLICY FOOD REQUIREMENT FOOD SECURITY GOVERNMENT POLICY GRAIN GRAIN MARKET GREEN REVOLUTION GROWING SEASON HUMAN CAPITAL IFPRI ILLITERACY INFORMAL LENDERS INTERNATIONAL BANK LABOR MARKET LABOR MARKETS LACK OF CREDIT LAND MARKETS LOAN MAIZE MAIZE PRODUCTION MANURE MARKET DEVELOPMENT MICRO-LENDING MICROFINANCE ORGANIC FERTILIZERS PESTICIDES PHOSPHATE PHOSPHATE FERTILIZERS PRICE VOLATILITY PRODUCE PRODUCTION TECHNOLOGIES PRODUCTIVITY GROWTH PROFITABILITY RAPE REPAYMENT REPAYMENT SCHEDULES SAVINGS SEED SEED TECHNOLOGY SEEDS SMALLHOLDER SMALLHOLDER FARMERS SOIL FERTILITY SOIL QUALITY SOIL TYPE SOILS SORGHUM TRADITIONAL SEEDS TRANSACTION COSTS UNION UREA VILLAGE VILLAGES WHEAT 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. 2012-03-19T18:38:37Z 2012-03-19T18:38:37Z 2010-03-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100310104103 http://hdl.handle.net/10986/3721 English Policy Research working paper ; no. WPS 5235 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper Africa Africa Sub-Saharan Africa East Africa Ethiopia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCESS TO CREDIT AGRICULTURAL ECONOMICS AGRICULTURAL EXTENSION AGRICULTURAL INNOVATIONS AGRICULTURAL MARKET AGRICULTURAL MARKETING AGRICULTURAL MARKETS AGRICULTURAL OUTPUT AGRICULTURAL PRACTICES AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTION SYSTEMS AGRICULTURAL PRODUCTIVITY AGRICULTURAL RESEARCH AGRICULTURAL SYSTEMS AGRICULTURAL TECHNIQUES AGRICULTURE ASYMMETRIC INFORMATION BANKS BARLEY CEREAL CROPS CEREAL YIELDS CHEMICAL FERTILIZER CHEMICAL FERTILIZERS CLIMATE CLIMATES COMMERCIAL BANK COMMERCIALIZATION COOPERATIVES CREDIT EXTENSION CREDIT MARKETS CREDIT PROVISION CREDIT-WORTHINESS CROP CROP AREA CROP CHOICE CROPLAND CROPS DOWN PAYMENT DUNG ECOLOGICAL ZONE ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY EMPLOYEE EXPENDITURES FALLOWING FAMILIES FARM FARM HOUSEHOLD FARM MANAGEMENT FARM SIZE FARMER FARMERS FARMING FARMING HOUSEHOLDS FARMING METHODS FARMS FERTILIZER FERTILIZER APPLICATION FERTILIZER APPLICATIONS FERTILIZER CONSUMPTION FERTILIZER COST FERTILIZER DISTRIBUTION FERTILIZER MARKET FERTILIZER PRICES FERTILIZER RESEARCH FERTILIZER USE FERTILIZERS FINANCES FINANCIAL MARKETS FOOD DEMAND FOOD POLICY FOOD REQUIREMENT FOOD SECURITY GOVERNMENT POLICY GRAIN GRAIN MARKET GREEN REVOLUTION GROWING SEASON HUMAN CAPITAL IFPRI ILLITERACY INFORMAL LENDERS INTERNATIONAL BANK LABOR MARKET LABOR MARKETS LACK OF CREDIT LAND MARKETS LOAN MAIZE MAIZE PRODUCTION MANURE MARKET DEVELOPMENT MICRO-LENDING MICROFINANCE ORGANIC FERTILIZERS PESTICIDES PHOSPHATE PHOSPHATE FERTILIZERS PRICE VOLATILITY PRODUCE PRODUCTION TECHNOLOGIES PRODUCTIVITY GROWTH PROFITABILITY RAPE REPAYMENT REPAYMENT SCHEDULES SAVINGS SEED SEED TECHNOLOGY SEEDS SMALLHOLDER SMALLHOLDER FARMERS SOIL FERTILITY SOIL QUALITY SOIL TYPE SOILS SORGHUM TRADITIONAL SEEDS TRANSACTION COSTS UNION UREA VILLAGE VILLAGES WHEAT
spellingShingle	ACCESS TO CREDIT AGRICULTURAL ECONOMICS AGRICULTURAL EXTENSION AGRICULTURAL INNOVATIONS AGRICULTURAL MARKET AGRICULTURAL MARKETING AGRICULTURAL MARKETS AGRICULTURAL OUTPUT AGRICULTURAL PRACTICES AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTION SYSTEMS AGRICULTURAL PRODUCTIVITY AGRICULTURAL RESEARCH AGRICULTURAL SYSTEMS AGRICULTURAL TECHNIQUES AGRICULTURE ASYMMETRIC INFORMATION BANKS BARLEY CEREAL CROPS CEREAL YIELDS CHEMICAL FERTILIZER CHEMICAL FERTILIZERS CLIMATE CLIMATES COMMERCIAL BANK COMMERCIALIZATION COOPERATIVES CREDIT EXTENSION CREDIT MARKETS CREDIT PROVISION CREDIT-WORTHINESS CROP CROP AREA CROP CHOICE CROPLAND CROPS DOWN PAYMENT DUNG ECOLOGICAL ZONE ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY EMPLOYEE EXPENDITURES FALLOWING FAMILIES FARM FARM HOUSEHOLD FARM MANAGEMENT FARM SIZE FARMER FARMERS FARMING FARMING HOUSEHOLDS FARMING METHODS FARMS FERTILIZER FERTILIZER APPLICATION FERTILIZER APPLICATIONS FERTILIZER CONSUMPTION FERTILIZER COST FERTILIZER DISTRIBUTION FERTILIZER MARKET FERTILIZER PRICES FERTILIZER RESEARCH FERTILIZER USE FERTILIZERS FINANCES FINANCIAL MARKETS FOOD DEMAND FOOD POLICY FOOD REQUIREMENT FOOD SECURITY GOVERNMENT POLICY GRAIN GRAIN MARKET GREEN REVOLUTION GROWING SEASON HUMAN CAPITAL IFPRI ILLITERACY INFORMAL LENDERS INTERNATIONAL BANK LABOR MARKET LABOR MARKETS LACK OF CREDIT LAND MARKETS LOAN MAIZE MAIZE PRODUCTION MANURE MARKET DEVELOPMENT MICRO-LENDING MICROFINANCE ORGANIC FERTILIZERS PESTICIDES PHOSPHATE PHOSPHATE FERTILIZERS PRICE VOLATILITY PRODUCE PRODUCTION TECHNOLOGIES PRODUCTIVITY GROWTH PROFITABILITY RAPE REPAYMENT REPAYMENT SCHEDULES SAVINGS SEED SEED TECHNOLOGY SEEDS SMALLHOLDER SMALLHOLDER FARMERS SOIL FERTILITY SOIL QUALITY SOIL TYPE SOILS SORGHUM TRADITIONAL SEEDS TRANSACTION COSTS UNION UREA VILLAGE VILLAGES WHEAT Zerfu, Daniel Larson, Donald F. Incomplete Markets and Fertilizer Use : Evidence from Ethiopia
geographic_facet	Africa Africa Sub-Saharan Africa East Africa Ethiopia
relation	Policy Research working paper ; no. WPS 5235
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Zerfu, Daniel Larson, Donald F.
author_facet	Zerfu, Daniel Larson, Donald F.
author_sort	Zerfu, Daniel
title	Incomplete Markets and Fertilizer Use : Evidence from Ethiopia
title_short	Incomplete Markets and Fertilizer Use : Evidence from Ethiopia
title_full	Incomplete Markets and Fertilizer Use : Evidence from Ethiopia
title_fullStr	Incomplete Markets and Fertilizer Use : Evidence from Ethiopia
title_full_unstemmed	Incomplete Markets and Fertilizer Use : Evidence from Ethiopia
title_sort	incomplete markets and fertilizer use : evidence from ethiopia
publishDate	2012
url	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100310104103 http://hdl.handle.net/10986/3721
_version_	1764387994025852928

Incomplete Markets and Fertilizer Use : Evidence from Ethiopia

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