ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

A multiple hurdle model of crop choice and fertilizer use: Evidence from high potential (AGP) zones of Ethiopia

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Presenter: Kibrewossen AbayIFPRI ESSP

Ethiopian Economics Association 14th International Conference on the Ethiopian EconomyJuly 21-23, 2016Addis Ababa

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Motivation

• African agriculture is characterized by:• Land fragmentation• low labor and land productivity• Further land fragmentation is expected in

the face of population pressure• Agricultural transformation understood to be

one means of tackling this problem• use of modern inputs such as fertilizer• high rate of return from the use of fertilizer

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Motivation

• Limited success in transforming African agriculture

• High prevalence of market imperfections • High transportation and transaction cost• Virtually non-existent insurance markets

• Small holders prefer less risky and low productive production options

• Inseparable production and consumption decisions

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Research question

• One important production decision is what to produce: which crop?• Crop choice can in turn influence decision

on use of fertilizer

• Does crop choice matter in fertilizer decision? How?

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Data

• The data for this study comes from Ethiopian Agriculture Growth Plan (AGP)• very detailed longitudinal household survey

from Ethiopia• covers 7,500 households• Data is collected in 2011 and 2013• Households on average produces 3.5 crops

per production year• The estimation is made on more than

50,000 crop level observations

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Data

• We classified crops as ‘fertilizable’ and ‘non-fertilizable’

• Use of fertilizer among crops categorized as ‘fertilizable’ ranges from 40%(maize) to 80% (wheat)

• In our sample 52% of the plots are cultivated by fertilizable crops

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Method

• Amount of fertilizer applied on a given plot is the outcome variable we want to estimate • Continuous over positive values• Many observations of ‘Y’ pile up at zero

• Hence the tobit model:

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Method

• Likelihood function of the Tobit model

• Double hurdle model¿

𝑙𝑖 (𝜃 )=1 (𝑌 𝑖=0 ) log [1−Φ( 𝑋 𝑖𝛾𝜎 )]+1 (𝑌 𝑖>0 ) log [Φ( 𝑋 𝑖𝛾

𝜎 )]+¿

¿

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Method

• Multiple hurdle• Double hurdle with sample selection

correction• A probit model estimation on decision to

plant a ‘fertilizable’ crop• And include the computed inverse mills

ratio in to the double hurdle model𝑙𝑖 (𝜃 )=1 (𝑌 𝑖=0 ) log [1−Φ( 𝑋 𝑖𝑚𝑟 ,𝑖𝛾

𝜎 )]+1 (𝑌 𝑖>0 ) log [Φ ( 𝑋𝑖𝑚𝑟 , 𝑖𝛾𝜎 )]+¿

¿

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Results

• Results of the probit model on crop choice

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Results

• W

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Results

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Very preliminary causality analysis

• Fertilizer use higher among crops that are both consumable and marketable

• Shelf life of a crop positively influences fertilizer use, especially among consumable items• Effect higher if a household has faced

storage loss of a crop in immediate previous years

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Summary

• Estimations show decisions on crop choice influence fertilizer use

• Incorporating crop choice in to estimations provide more fit estimations

• Inclusion of crop choice models brought important changes on the magnitude and significance of some variables• Crop diversification • Sex of household head• Marketability of the crop

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Policy implications

• Efforts to improve fertilizer use should be crop specific• Consumable, marketable, and storable

• Studies show crop specific fertilizer use are not universal• There is a chance fertilizer use can be

enhanced among ‘non-fertilizable’ crops• Consumption preference is likely to change

• Crop diversification not necessarily a negative factor

Thank you!