Do fertilizer and seed subsidies strengthen farmers' market participation? Evidence from Tanzania's subsidy program

Abstract

Abstract This study examines whether the Tanzanian subsidy for inorganic fertilizers and improved seeds encourages farmers to participate in the input and grain markets. Using six waves from 2008–2009 to 2020–2021 of the National Panel Survey, we investigated whether the subsidy affected farmers' purchases and expenditures for all conceivable inputs, including nonsubsidized inputs (organic fertilizers, traditional seeds, pesticides/herbicides, labor, and capital). Subsequently, we estimated the subsidy's impact on the probability of farmers selling crops and their sales revenue. In the input markets, we found that improved seeds, rather than inorganic fertilizers, played a major role in farmers' market activities. Beneficiaries who received subsidized seeds were more likely to purchase pesticides/herbicides, hire more labor, and borrow oxen and tractors to make their farmland suitable for the growth of improved seeds. In crop markets, we found that receiving both subsidized fertilizers and seeds increased the probability of farmers selling maize or paddy nearly threefold relative to the receipt of only subsidized fertilizer. Moreover, legume sales revenue also increased among seed beneficiaries through intercropping with maize and paddy.