Agricultural Input Subsidies and Productivity: The Case of Paraguayan Farmers

It is a well-known fact that a great majority of countries implement agricultural input subsidies as a tool to boost agricultural productivity and output. However, even though this practice is widely spread and represents a large part of the agricultural budget, little emphasis has been placed on the evaluation of the effectiveness of such schemes. This paper aims to shed light on this issue by exploring the impact of agricultural input subsidies on agricultural productivity. Using a quasi experimental approach (Propensity Score Matching), this study estimates the impact of receiving an agricultural input donation on the value of production per hectare as a measure of the effect on agricultural productivity. To this end, data from the "Encuesta Permanente de Hogares" of Paraguay, a nationally representative household survey collected in 2012, was utilized. The results provide evidence that agricultural input donations do not have an impact on agricultural productivity or input utilization.