IDEAS home Printed from https://ideas.repec.org/a/spt/admaec/v7y2017i1f7_1_3.html
   My bibliography  Save this article

Evaluating the Fertilizer Subsidy Reforms in the Rice Production Sector in Sri Lanka: A Simulation Analysis

Author

Listed:
  • Chatura Sewwandi Wijetunga
  • Katsuhiro Saito

Abstract

This paper analyses the change in fertilizer subsidy policy in Sri Lanka with a view to understand its impact on national rice production, demand/supply of inputs, farm profit and government budget. In addition, cost effectiveness of the fertilizer subsidy is evaluated in terms of transfer inefficiency. Demand supply equilibrium model along with input markets is employed to obtain the results. The results indicate, complete fertilizer subsidy reduction would reduce rice production by around 4%, while a 36% decline in the fertilizer demand for paddy cultivation. Although, the subsidy cut reduces the enormous government burden, farmers are unfavorably affected by 40% reduction of farm profit. Moreover, fertilizer subsidy would cause government to spend Sri Lankan Rupees (SLRs.) 1.38-1.91 to increase farm profit by one rupee. Meanwhile, a 3% decline of paddy production and a 14.5% increase in the rice price is expected with the proposed cash transfer policy.JEL classification numbers: Q11, Q13Keywords: fertilizer subsidy, transfer inefficiency, two-stage technology.

Suggested Citation

  • 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.
    • Handle: RePEc:spt:admaec:v:7:y:2017:i:1:f:7_1_3
    as

    Download full text from publisher

    File URL: http://www.scienpress.com/Upload/AMAE%2fVol%207_1_3.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kaneda, Hiromitzu, 1982. "Specification of production functions for analyzing technical change and factor inputs in agricultural development," Journal of Development Economics, Elsevier, vol. 11(1), pages 97-108, August.
    2. Weerahewa, Jeevika, 2004. "Impacts of trade liberalization and market reforms on the rice sector in Sri Lanka," MTID discussion papers 70, International Food Policy Research Institute (IFPRI).
    3. Kherallah, Mylene & Delgado, Christopher L. & Gabre-Madhin, Eleni Z. & Minot, Nicholas & Johnson, Mi (ed.), 2002. "Reforming agricultural markets in Africa: Achievements and challenges," IFPRI books, International Food Policy Research Institute (IFPRI), number 0-8018-7145-X.
    4. 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.
    5. Asian Development Bank (ADB), 2012. "ADB Cooperation with Civil Society Annual Report 2010," ADB Reports RPT124429, Asian Development Bank (ADB), revised 18 Apr 2014.
    6. John Maluccio, 2010. "The Impact of Conditional Cash Transfers on Consumption and Investment in Nicaragua," Journal of Development Studies, Taylor & Francis Journals, vol. 46(1), pages 14-38.
    7. Mateusz Filipski & J. Edward Taylor, 2012. "A simulation impact evaluation of rural income transfers in Malawi and Ghana," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 4(1), pages 109-129, March.
    8. John M. Piotrowski & David Coady & Justin Tyson & Rolando Ossowski & Robert Gillingham & Shamsuddin Tareq, 2010. "Petroleum Product Subsidies; Costly, Inequitable, and On the Rise," IMF Staff Position Notes 2010/05, International Monetary Fund.
    9. Kherallah, Mylène & Delgado, Christopher L. & Gabre-Madhin, Eleni Z. & Minot, Nicholas & Johnson, Michael, 2002. "Reforming agricultural markets in Africa," Food policy statements 38, International Food Policy Research Institute (IFPRI).
    10. Banful, Afua Branoah, 2011. "Old Problems in the New Solutions? Politically Motivated Allocation of Program Benefits and the "New" Fertilizer Subsidies," World Development, Elsevier, vol. 39(7), pages 1166-1176, July.
    11. 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.
    12. Minot, Nicholas & Benson, Todd, 2009. "Fertilizer subsidies in Africa: Are vouchers the answer?," Issue briefs 60, International Food Policy Research Institute (IFPRI).
    13. Kikuchi, M. & Aluwihare, P. B., 1990. "Fertilizer response functions of rice in Sri Lanka: estimation and some applications," IWMI Research Reports H006935, International Water Management Institute.
    14. [multiple or corporate authorship]., 2014. "CASE annual report 2013," LSE Research Online Documents on Economics 58040, London School of Economics and Political Science, LSE Library.
    15. Sibande, Lonester & Bailey, Alastair & Davidova, Sophia, 2015. "The impact of farm input subsidies on household welfare in Malawi," 2015 Conference, August 9-14, 2015, Milan, Italy 212830, International Association of Agricultural Economists.
    16. 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.
    17. Hans P. Binswanger, 1974. "A Cost Function Approach to the Measurement of Elasticities of Factor Demand and Elasticities of Substitution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(2), pages 377-386.
    18. Asian Development Bank (ADB), 2014. "Office of the Ombudsperson 2012 Annual Report," ADB Reports RPT135711, Asian Development Bank (ADB).
    19. World Bank, 2014. "The World Bank Annual Report 2014 [Informe anual 2014 del Banco Mundial]," World Bank Publications - Books, The World Bank Group, number 20093.
    20. John M. Piotrowski & Mr. David Coady & Justin Tyson & Mr. Rolando Ossowski & Mr. Robert Gillingham & Mr. Shamsuddin Tareq, 2010. "Petroleum Product Subsidies: Costly, Inequitable, and On the Rise," IMF Staff Position Notes 2010/005, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chamila Kumari Chandrasiri & Takuji W. Tsusaka & Tien D. N. Ho & Farhad Zulfiqar & Avishek Datta, 2023. "Impacts of climate change on paddy yields in different climatic zones of Sri Lanka: a panel data approach," Asia-Pacific Journal of Regional Science, Springer, vol. 7(2), pages 455-489, June.

    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, 2016. "Rice production structures in Sri Lanka: The normalized translog profit function approach," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 6(2), pages 21-35, February.
    2. Kumara, Ajantha Sisira & Samaratunge, Ramanie, 2017. "Impact of ill-health on household consumption in Sri Lanka: Evidence from household survey data," Social Science & Medicine, Elsevier, vol. 195(C), pages 68-76.
    3. Lombardi, Domenico & Siklos, Pierre L., 2016. "Benchmarking macroprudential policies: An initial assessment," Journal of Financial Stability, Elsevier, vol. 27(C), pages 35-49.
    4. Ito, Hiro & Kawai, Masahiro, 2016. "Trade invoicing in major currencies in the 1970s–1990s: Lessons for renminbi internationalization," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 123-145.
    5. Jayne, Thomas S. & Mason, Nicole M. & Burke, William J. & Ariga, Joshua, 2018. "Review: Taking stock of Africa’s second-generation agricultural input subsidy programs," Food Policy, Elsevier, vol. 75(C), pages 1-14.
    6. G. Ardizzi & F. Crudu & C. Petraglia, 2015. "The Impact of Electronic Payments on Bank Cost Efficiency: Nonparametric Evidence," Working Paper CRENoS 201517, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    7. 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.
    8. 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).
    9. De Gorter, Harry & Tsur, Yacov, 2008. "Towards a Genuine Sustainability Standard for Biofuel Production," 14th ICABR Conference, June 16-18, 2010, Ravello, Italy 188419, International Consortium on Applied Bioeconomy Research (ICABR).
    10. De Groote, Hugo & Andam, Kwaw S. & Munyua, Bernard & Spielman, David J., 2010. "Market Segmentation Strategies And Seed Purchasing Decisions Among Smallholders: Preliminary Findings From Kenya," 14th ICABR Conference, June 16-18, 2010, Ravello, Italy 188084, International Consortium on Applied Bioeconomy Research (ICABR).
    11. Samuel Bazzi & Sudarno Sumarto & Asep Suryahadi, . "It's All in the Timing: Cash Transfers and Consumption Smoothing in a Developing Country," Journal Article, Publications Department.
    12. Stephanie Bolt & David Emery & Paul Harrigan, 2014. "Fast Retail Payment Systems," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 43-52, December.
    13. Bazzi, Samuel & Sumarto, Sudarno & Suryahadi, Asep, 2015. "It's all in the timing: Cash transfers and consumption smoothing in a developing country," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 267-288.
    14. 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.
    15. Crespi, Gustavo & Giuliodori, David & Giuliodori, Roberto & Rodriguez, Alejandro, 2016. "The effectiveness of tax incentives for R&D+i in developing countries: The case of Argentina," Research Policy, Elsevier, vol. 45(10), pages 2023-2035.
    16. Liverpool-Tasie, Lenis Saweda, 2012. "Targeted Subsidies and Private Market Participation: An Assessment of Fertilizer Demand in Nigeria:," IFPRI discussion papers 1194, International Food Policy Research Institute (IFPRI).
    17. Mr. Kangni R Kpodar & Ms. Stefania Fabrizio & Kodjovi M. Eklou, 2019. "Export Competitiveness - Fuel Price Nexus in Developing Countries: Real or False Concern?," IMF Working Papers 2019/025, International Monetary Fund.
    18. Isabel Lambrecht & Monica Schuster & Sarah Asare Samwini & Laura Pelleriaux, 2018. "Changing gender roles in agriculture? Evidence from 20 years of data in Ghana," Agricultural Economics, International Association of Agricultural Economists, vol. 49(6), pages 691-710, November.
    19. 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.
    20. Augusto Lopez-Claros, 2014. "Fiscal Challenges After the Global Financial Crisis: A Survey of Key Issues," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-34.

    More about this item

    Keywords

    fertilizer subsidy; transfer inefficiency; two-stage technology.;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

    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:spt:admaec:v:7:y:2017:i:1:f:7_1_3. 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: Eleftherios Spyromitros-Xioufis (email available below). General contact details of provider: http://www.scienpress.com/ .

    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.