IDEAS home Printed from https://ideas.repec.org/a/sae/soueco/v22y2021i1p88-109.html
   My bibliography  Save this article

The Impact of Policy Shift from In-kind Transfers to Direct Cash Transfers on Paddy Production: Evidence from Mahaweli H System in Sri Lanka

Author

Listed:
  • Sumudu Perera
  • Ananda Rathnayake
  • Janaka Fernando
  • Thilani Navaratne
  • Dilan Rajapakshe

Abstract

In 2016, the Sri Lankan government introduced a policy change related to fertilizer subsidy by converting the in-kind transfer into a direct cash transfer. This research article analyses the consequences of this policy change on the paddy production from economics perspective. The analysis uses national-level data from 1961 to 2013 and farm-level data collected in 2016. Macro-level findings manifest that the use of fertilizer significantly increases the paddy production in Sri Lanka. It was also identified that the cash amount granted under the direct cash transfer policy is not equivalent to the in-kind transfer programme. As a result, paddy production is expected to decline under the direct cash transfer programme when compared to the material subsidy scheme. However, this is against the preference of economists on direct cash transfers over in-kind transfers. The findings reveal that direct cash transfers increase the paddy production under two conditions: (a) when rational farmers effectively utilize the cash grants to optimize their production inputs; and (b) an equivalent amount of in-kind transfer is provided as direct cash transfer. Hence, direct cash transfers are not always better than in-kind transfers; it is better when in-kind transfer is compensated with an equivalent amount of cash transfer. JEL: A1, B1, B2, C1, C5, D6, N5

Suggested Citation

  • Sumudu Perera & Ananda Rathnayake & Janaka Fernando & Thilani Navaratne & Dilan Rajapakshe, 2021. "The Impact of Policy Shift from In-kind Transfers to Direct Cash Transfers on Paddy Production: Evidence from Mahaweli H System in Sri Lanka," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 22(1), pages 88-109, March.
    • Handle: RePEc:sae:soueco:v:22:y:2021:i:1:p:88-109
    DOI: 10.1177/13915614211004821
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/13915614211004821
    Download Restriction: no
    File URL: https://libkey.io/10.1177/13915614211004821?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Vijay Paul Sharma & Hrima Thaker, 2010. "Fertilizer Subsidy in India: Who are the Beneficiaries?," Working Papers id:2794, eSocialSciences.
    2. Jenny Aker, 2013. "Cash or Coupons? Testing the Impacts of Cash versus Vouchers in the Democratic Republic of Congo," Working Papers 320, Center for Global Development.
    3. Cristina Echevarria, 1998. "A Three-Factor Agricultural Production Function: The Case of Canada," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 63-75.
    4. Bardhan, Pranab K, 1973. "Size, Productivity, and Returns to Scale: An Analysis of Farm-Level Data in Indian Agriculture," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1370-1386, Nov.-Dec..
    5. Tagliati, Federico, 2022. "Welfare effects of an in-kind transfer program: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 154(C).
    6. Chibwana, Christopher & Shively, Gerald & Fisher, Monica & Jumbe, Charles & Masters, William A., 2014. "Measuring the impacts of Malawi’s farm input subsidy programme," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 9(2), pages 1-16, April.
    7. World Bank, 2010. "Bangladesh - Public Expenditure and Institutional Review : Towards a Better Quality of Public Expenditure - Sectoral Analysis," World Bank Publications - Reports 2876, The World Bank Group.
    8. I Fraser, 2002. "The Cobb-Douglas Production Function: An Antipodean Defence?," Economic Issues Journal Articles, Economic Issues, vol. 7(1), pages 39-58, March.
    9. World Bank, 2010. "Bangladesh - Public Expenditure and Institutional Review : Towards a Better Quality of Public Expenditure - Main Report," World Bank Publications - Reports 2875, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chatura Sewwandi Wijetunga & Katsuhiro Saito, 2017. "Evaluating the Fertilizer Subsidy Reforms in the Rice Production Sector in Sri Lanka: A Simulation Analysis," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(1), pages 1-3.
    2. Coronese, Matteo & Occelli, Martina & Lamperti, Francesco & Roventini, Andrea, 2023. "AgriLOVE: Agriculture, land-use and technical change in an evolutionary, agent-based model," Ecological Economics, Elsevier, vol. 208(C).
    3. Muthukumara S. Mani & Limin Wang, 2014. "Climate Change and Health Impacts," World Bank Publications - Reports 21820, The World Bank Group.
    4. Mostafa Amir, Sabbih, 2017. "An Assessment of the Efficacy of Delivering the Annual Development Program in Bangladesh," MPRA Paper 84668, University Library of Munich, Germany.
    5. Sharma, Vijay Paul, 2012. "India’s Agricultural Development Under the New Economic Regime: Policy Perspective and Strategy for the 12th Five Year Plan," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 67(1), pages 1-33.
    6. Jonathan Rose & Tracey M. Lane & Tashmina Rahman, 2014. "Bangladesh Governance in the Health Sector," World Bank Publications - Reports 21661, The World Bank Group.
    7. Mochebelele, Motsamai T. & Winter-Nelson, Alex, 2000. "Migrant Labor and Farm Technical Efficiency in Lesotho," World Development, Elsevier, vol. 28(1), pages 143-153, January.
    8. Lara Cockx & Nathalie Francken, 2016. "Evolution and impact of EU aid for food and nutrition security: a review," Working Papers of Department of Economics, Leuven 540512, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    9. Sylvester Amoako Agyemang & Tomáš Ratinger & Miroslava Bavorová, 2022. "The Impact of Agricultural Input Subsidy on Productivity: The Case of Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(3), pages 1460-1485, June.
    10. Klasen, Stephan & Reimers, Malte, 2017. "Looking at Pro-Poor Growth from an Agricultural Perspective," World Development, Elsevier, vol. 90(C), pages 147-168.
    11. Fujimoto, Takefumi & Suzuki, Aya, 2021. "Do Fertilizer and Seed Subsidies Strengthen Farmers' Market Participation? the Impact of Tanzania NAIVS on Farmers' Purchase of Agricultural Inputs and Their Maize-Selling Activities," 2021 Conference, August 17-31, 2021, Virtual 315044, International Association of Agricultural Economists.
    12. Aragón, Fernando M. & Restuccia, Diego & Rud, Juan Pablo, 2022. "Are small farms really more productive than large farms?," Food Policy, Elsevier, vol. 106(C).
    13. Fang Xia & Lingling Hou & Songqing Jin & Dongqing Li, 2020. "Land size and productivity in the livestock sector: evidence from pastoral areas in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(3), pages 867-888, July.
    14. Tim J. Coelli & George E. Battese, 1996. "Identification Of Factors Which Influence The Technical Inefficiency Of Indian Farmers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 40(2), pages 103-128, August.
    15. Rinku, 2023. "Linkage of Cultural and Gender Diversity with Productivity in Chikankari Industry of Lucknow," Journal of Development Policy and Practice, , vol. 8(1), pages 43-54, January.
    16. Akram-Lodhi, A.H., 2001. "Vietnam's agriculture: is there an inverse relationship?," ISS Working Papers - General Series 19096, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    17. Thapa, Sridhar, 2007. "The relationship between farm size and productivity: empirical evidence from the Nepalese mid-hills," 106th Seminar, October 25-27, 2007, Montpellier, France 7940, European Association of Agricultural Economists.
    18. repec:zbw:iamodp:274820 is not listed on IDEAS
    19. Liverpool-Tasie, Lenis Saweda O. & Jayne, Thomas & Muyanga, Milu & Sanou, Awa, 2017. "Are African Farmers Experiencing Improved Incentives To Use Fertilizer?," Feed the Future Innovation Lab for Food Security Policy Research Papers 270632, Michigan State University, Department of Agricultural, Food, and Resource Economics, Feed the Future Innovation Lab for Food Security (FSP).
    20. C.S.C. Sekhar, 2021. "Price or income support to farmers? Policy options and implications," IEG Working Papers 420, Institute of Economic Growth.
    21. Phu Nguyen-Van & Nguyen To-The, 2016. "Technical efficiency and agricultural policy: evidence from the tea production in Vietnam," Review of Agricultural, Food and Environmental Studies, Springer, vol. 97(3), pages 173-184, November.

    More about this item

    Keywords

    Paddy production; fertilizer subsidy; direct cash transfer; in-kind transfer; Sri Lanka;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D6 - Microeconomics - - Welfare Economics
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:soueco:v:22:y:2021:i:1:p:88-109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.ips.lk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.