Do input subsidies crowd in or crowd out other soil fertility management practices? Panel survey evidence from Zambia

In many countries in sub-Saharan Africa, low crop yield response to inorganic fertilizer contributes to low profitability of fertilizer use and reduces the positive effects of and returns to input subsidy programs (ISPs). A major reason for poor crop yield response to fertilizer is low soil quality. However, using other soil fertility management (SFM) practices in conjunction with fertilizer can improve its response rate. But do ISPs encourage (‘crowd in’) or discourage (‘crowd out’) the use of such SFM practices? Using nationally representative household panel survey data, we estimate the effects of subsidized fertilizer acquired through Zambia’s ISP on the use of several SFM practices: (i) leaving land fallow, (ii) intercropping, and (iii) applying animal manure. For each practice, we estimate the household-level effects of an increase in the quantity of subsidized fertilizer acquired on the probability of SFM adoption, land area covered by SFM, and the share of land dedicated to SFM, using the ordinary least squares, fixed effects, and fixed effects-instrumental variable estimators. The results suggest that subsidized fertilizer has statistically significant crowding out effects on all fallow variables, for all measures of adoption, using all estimators. Additionally, we find some evidence that subsidized fertilizer crowds out intercropping. However, the weight of the evidence suggests that subsidized fertilizer has no significant effect on intercropping with legumes or the use of animal manure. By disincentivizing fallowing and intercropping, Zambia’s ISP may be inadvertently reducing soil quality and the effectiveness and profitability of its main input, inorganic fertilizer.