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 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.

Bibliographic Details

Main Authors:	Zerfu, Daniel, Larson, Donald F.
Language:	English
Published:	2010-03-01
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 https://hdl.handle.net/10986/3721
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