Working Paper 59 - Modeling the Effects of Input Market Reforms on Fertilizer Demand and Maize Production: A Case Study from Kenya

Abstract

Kenya is one of the few countries in Sub-Saharan Africa to experience an impressive rise in fertilizer use following a series of input market reforms in the early 1990s. Two major consequences of these reforms were declining fertilizer marketing margins and distances between farmers and fertilizer dealers. We quantify the effects of these changes on commercial fertilizer use and maize production in Kenya by estimating fertilizer demand and maize supply response functions using nationwide household survey data. Our results indicate that between 1997 and 2010, the estimated 27% reduction in real fertilizer prices that can be attributed to falling marketing margins associated with market reforms led to a 36% increase in nitrogen use on maize fields and a 9% increase in maize production resulting from both yield and acreage effects. On the other hand, decreasing distances to fertilizer retailers from the perspective of a given household did not appear to raise fertilizer use or maize supply, although a comparison across households using average distances over the panel indicate that those closer to retailers do apply more fertilizer on their maize fields.

Key words: agricultural productivity, fertilizer, input market reforms, Kenya, policy

 

Working Paper 59-Modeling the Effects of Input Market Reforms on Fertilizer Demand and Maize Production: A Case Study from Kenya