Impacts of Subsidized Hybrid Seed on Indicators of Economic Well-Being among Smallholder Maize Growers in Zambia

Nicole M. Mason* Michigan State University

Department of Agricultural, Food, and Resource Economics and the Indaba Agricultural Policy Research Institute

446 W. Circle Dr. Rm. 207 East Lansing, MI 48824

masonn@msu.edu

Melinda Smale Michigan State University

Department of Agricultural, Food, and Resource Economics 446 W. Circle Dr. Rm. 207

East Lansing, MI 48824 msmale@msu.edu

*No senior authorship assigned

Selected Poster prepared for presentation at the Agricultural & Applied Economics Association’s

2013 AAEA & CAES Joint Annual Meeting, Washington, DC, August 4-6, 2013.

Copyright 2013 by Nicole M. Mason and Melinda Smale. All rights reserved. Readers may make verbatim copies of

this document for non-commercial purposes by any means, provided that this copyright notice appears on all such

copies.

QUICK DESIGN GUIDE (--THIS SECTION DOES NOT PRINT--)

This PowerPoint 2007 template produces a 48”x96” professional poster. You can use it to create your research poster and save valuable time placing titles, subtitles, text, and graphics. We provide a series of online tutorials that will guide you through the poster design process and answer your poster production questions. To view our template tutorials, go online to PosterPresentations.com and click on HELP DESK. When you are ready to print your poster, go online to PosterPresentations.com.

Need Assistance? Call us at 1.866.649.3004

Object Placeholders

Using the placeholders To add text, click inside a placeholder on the poster and type or paste your text. To move a placeholder, click it once (to select it). Place your cursor on its frame, and your cursor will change to this symbol Click once and drag it to a new location where you can resize it. Section Header placeholder Click and drag this preformatted section header placeholder to the poster area to add another section header. Use section headers to separate topics or concepts within your presentation. Text placeholder Move this preformatted text placeholder to the poster to add a new body of text. Picture placeholder Move this graphic placeholder onto your poster, size it first, and then click it to add a picture to the poster.

RESEARCH POSTER PRESENTATION DESIGN © 2012

www.PosterPresentations.com

QUICK TIPS (--THIS SECTION DOES NOT PRINT--)

This PowerPoint template requires basic PowerPoint (version 2007 or newer) skills. Below is a list of commonly asked questions specific to this template. If you are using an older version of PowerPoint some template features may not work properly.

Template FAQs Verifying the quality of your graphics Go to the VIEW menu and click on ZOOM to set your preferred magnification. This template is at 100% the size of the final poster. All text and graphics will be printed at 100% their size. To see what your poster will look like when printed, set the zoom to 100% and evaluate the quality of all your graphics before you submit your poster for printing. Modifying the layout This template has four different column layouts. Right-click your mouse on the background and click on LAYOUT to see the layout options. The columns in the provided layouts are fixed and cannot be moved but advanced users can modify any layout by going to VIEW and then SLIDE MASTER. Importing text and graphics from external sources TEXT: Paste or type your text into a pre-existing placeholder or drag in a new placeholder from the left side of the template. Move it anywhere as needed. PHOTOS: Drag in a picture placeholder, size it first, click in it and insert a photo from the menu. TABLES: You can copy and paste a table from an external document onto this poster template. To adjust the way the text fits within the cells of a table that has been pasted, right-click on the table, click FORMAT SHAPE then click on TEXT BOX and change the INTERNAL MARGIN values to 0.25. Modifying the color scheme To change the color scheme of this template go to the DESIGN menu and click on COLORS. You can choose from the provided color combinations or create your own.

©  2013  PosterPresenta/ons.com          2117  Fourth  Street  ,  Unit  C          Berkeley    CA    94710          posterpresenter@gmail.com  

Student discounts are available on our Facebook page. Go to PosterPresentations.com and click on the FB icon

The   Zambian   government   has   drama/cally   scaled   up   its   input   subsidy  program  over   the   last   decade,   from   2,400  MT   of   hybrid  maize   seed   in  2002/03  to  8,730  MT  in  2012/13.  The  seed  subsidy  rate  has  ranged  from  50%  to  60%.  An  average  of  40%  of  total  government  agricultural  sector  spending  is  devoted  to  agricultural  input  subsidies  each  year.  

1.  INTRODUCTION   3.  HYPOTHESES  Spurred  by  current  debates  about  beneficiary  bias  in  the  new  genera/on  of   input   subsidies   implemented   across   Sub-­‐Saharan   Africa,   we   test   the  hypotheses  that  subsidies  on  hybrid  seed  change  maize  produc/on,  total  household   income,   the   severity   of   poverty,   and   rela/ve   depriva/on  among  smallholder  maize  growers  in  Zambia.  The  analysis  contributes  to  the  literature  by  measuring  the  quan/ta/ve  effects  of  seed  (as  compared  to   fer/lizer)   subsidies  on   indicators  of  household  well-­‐being   rather   than  input  demand.    

2.  SEED  SUBSIDIES  IN  ZAMBIA  

The   data   are   from   the   second   and   third   waves   of   the   Supplemental  Survey  (SS),  a  naMonally-­‐representaMve  panel  survey  of  smallholder  farm  households   in   Zambia.   The   SS   was   conducted   by   the   Zambian   Central  StaMsMcal   Office   (CSO)   and   Ministry   of   Agriculture   and   CooperaMves  (MACO)  in  conjunc/on  with  MSU’s  Food  Security  Research  Project  (FSRP).      

A   total   of   6,922   households  were   interviewed   in   the   first   wave   of   the  survey,  which  covered  the  1999/2000  agricultural  year.  Maize  seed  details  were  not  recorded,  so  the  first  wave  of   the  survey   is  not  used  here.  The  second   wave   of   the   survey   covered   the   2002/03   agricultural   year   and  5,358  households  were  successfully  re-­‐interviewed.  Of  these,  4,286  were  re-­‐interviewed  in  the  third  wave  of  the  survey,  which  covered  the  2006/07  agricultural   year.   The   balanced   panel   of   3,231   households   that   grew  maize  in  the  la\er  two  survey  waves  is  used  in  the  econometric  analysis.    

5.  DATA   9.  CONCLUSIONS  &  POLICY  IMPLICATIONS  Empirical   evidence   suggests   that   the   hybrid   maize   seed   component   of  Zambia’s   input   subsidy   program   led   to   modest   increases   in   maize  producMon   and   incomes   among   smallholder   maize   growers,   reducing  their  severity  of  poverty  and  relaMve  deprivaMon  (income  inequality).      

Simple   calcula/ons   suggest   that   the   benefits   (increased   household  income)  of  the  seed  subsidy  outweigh  the  costs.    •  The   private   benefit-­‐cost   raMo   (BCR)   ranges   from   2.73   to   5.46  

depending  on   if   the   farmer  opts   for   the  most  or   least  expensive  seed  available  through  the  program.    

•  The   social   BCR   ranges   from   1.09   to   2.18   excluding   unobserved  administra/ve  costs.    

 

Efforts   to   improve   targeMng   and   reduce   displacement   of   commercial  hybrid   maize   seed   purchases   by   subsidized   seed   could   increase   the  impacts   of   the   seed   component   of   Zambia’s   input   subsidy   program   on  smallholder  farmers’  economic  well-­‐being.  

REFEERENCES  MACO.  2008.  Fer$lizer  Support  Programme  Internal  Evalua$on.  MACO,  Lusaka,  Zambia.  Accessed  March  2013,  available  at  h\p://www.aec.msu.edu/fs2/zambia/tour/FSP_Internal_Evaua/on_2008.pdf.      

Mason,  N.  M.,  and  J.  Ricker-­‐Gilbert.  2013.  “Disrup/ng  Demand  for  Commercial  Seed:  Input  Subsidies  in  Malawi  and  Zambia.”  World  Development  45:  75-­‐91.    

Stark,  O.,  and  E.  Taylor.  1989.  “Rela/ve  Depriva/on  and  Interna/onal  Migra/on.”  Demography  26:  1-­‐14.  

ACKNOWLEDGEMENTS    

We  hypothesize   that  an  addiMonal   kilogram  of   subsidized  hybrid  maize  seed  (s)  allocated  to  a  smallholder  farm  household  raises  its  use  of  hybrid  maize  seed  (h),  which  in  turn:  

•  Raises  its  maize  producMon  and  total  household  income  •  Reduces  its  severity  of  poverty  and  relaMve  deprivaMon    

(income  inequality)  compared  to  other  households  

0  

1  

2  

3  

4  

5  

6  

Category  1  

Category  2  

Category  3  

Category  4  

Series  1  

Series  2  

Series  3  

7.  DESCRIPTIVE  RESULTS  

Nicole  M.  Mason  (masonn@msu.edu)  &  Melinda  Smale  (msmale@msu.edu)  Department  of  Agricultural,  Food,  and  Resource  Economics,  Michigan  State  University  

Impacts  of  subsidized  hybrid  seed  on  indicators  of  economic  well-­‐being    among  smallholder  maize  growers  in  Zambia  

0  

10  

20  

30  

40  

50  

60  

70  

80  

0  1,000  2,000  3,000  4,000  5,000  6,000  7,000  8,000  9,000  

10,000  

2002/03  

2003/04  

2004/05  

2005/06  

2006/07  

2007/08  

2008/09  

2009/10  

2010/11  

2011/12  

2012/13  

Seed

 subsidy  rate  (%

)  

MT  of  su

bsidized

 seed

 

Maize  seed  (MT)   Seed  subsidy  (%)  

Subsidized  hybrid  maize  seed  quanMMes  &  subsidy  rates  

The   objec/ves   of   the   input   subsidy   program   include   “improving  household   and   naMonal   food   security,   incomes,   [and]   accessibility   to  agricultural  inputs  by  small-­‐scale  farmers  through  a  subsidy  and  building  the   capacity   of   the   private   sector   to   par/cipate   in   the   supply   of  agricultural  inputs”  (MACO,  2008).    

Poverty  reducMon   is  an   implicit  objec/ve  as  the   input  subsidy  program  (the   Farmer   Input   Support   Programme)   is   considered   a   Poverty  ReducMon  Programme  (PRP)  by  the  Zambian  government,  and  accounts  for  an  average  of  47%  of  agricultural  sector  PRP  spending.    

4.  CONCEPTUAL  FRAMEWORK  &  OUTCOMES  

Subsidized  hybrid  maize  seed  received  

(s)  Other  factors  

(z)  

Hybrid  maize    seed  planted  

(h)  Other  factors  

(x)  

Outcomes  (y)  Maize  producMon  

Income  Severity  of  poverty  (squared  %  below  

$1.25/capita/day  poverty  line)  Stark-­‐Taylor  relaMve  deprivaMon  (income)  

Eq. 1. y = y[h(s,z), x]

Eq. 2. ∂y

∂s= ∂y∂h(s,z)

⋅ ∂h(s,z)∂s

A   non-­‐separable   agricultural   household   model   mo/vates   our  conceptual   framework.   Demand   for   hybrid   maize   (h)   and   household  outcomes   (y)   are   affected   by   endogenous   prices   (household  characterisMcs)   and   observed   prices   as   well   as   market   and   agro-­‐ecological  condiMons  (z,  x).      

Subsidized  seed  (s)  is  treated  as  a  quasi-­‐fixed  factor  because  households  cannot  freely  choose  the  quan/ty  that  they  receive.      

Income  inequality  for  household  i  is  measured  as  the  Stark-­‐Taylor  (1989)  index  of  relaMve  deprivaMon  (RDi):    

RDi  =  ADi  *  Pi  where  ADi  is  the  average  income  of  households  with  income  greater  than  household  i,  and  Pi  is  the  propor/on  of  households  with  income  greater  than  household  i.  

6.  ESTIMATION  STRATEGY  The  two  terms   in  Eq.  2  are  es/mated  separately  and  then  mul/plied  to  obtain  the  average  par/al  effect  of  subsidized  seed  on  an  outcome.      

Panel   data  methods   (the  fixed  effects  es/mator,   FE,   or   the   correlated  random   effects   approach,   CRE)   are   used   to   control   for   Mme   invariant  heterogeneity.    

Planted  hybrid  Did  not    

plant  hybrid  No  

subsidy   Subsidy  (i)  %  of  HHs:  2002/03   26.4   11.0   62.6  (ii)  %  of  HHs:  2006/07   31.9   9.8   58.3  (iii)  Hybrid  seed  planted  (kg)   38.4   26.6   0  (iv)  Maize  produc/on  (kg)   3,736   2,194   990  (v)  Income  (‘000  ZMK)   8,870    

($2,217)  5,815  

($1,454)  2,860  ($715)  

(vi)  Income  <  $1.25/day  pov  line  (=1)     0.81   0.87   0.95  (vii)  Poverty  severity  (%)   37.0   45.2   57.3  (viii)  Rela/ve  depriva/on  (‘000  ZMK)   3,656  

($914)  3,852  ($963)  

4,315  ($1,008)  

Rows   (i)   &   (ii):   In   the   two   study   years,   roughly   40%   of   Zambian  smallholder  maize  growers  planted  maize  hybrids,  and  about  ¼  of  those  planMng  hybrids  received  seed  through  the  subsidy  program.      Rows  (iv)  to  (viii):  Comparing  uncondiMonal  mean  outcomes  across  the  three  groups  of  households  (columns):  •  Subsidy   recipients   were   worse   off   than   non-­‐subsidy   recipients   who  planted  maize  hybrids  

•  Households  that  did  not  plant  maize  hybrids  were  desMtute!  

8.  ECONOMETRIC  RESULTS  

∂h(s,z)

∂s

An  addi/onal  kg  of   subsidized   seed   (s)   raises  hybrid   seed  use  (h)  by  0.42  kg  on  average,  ceteris  paribus.  •  This  effect  is  less  than  1  kg  due  to  crowding  out:  subsidized  

seed   displaces   some   commercial   hybrid   seed   purchases  (Mason  &  Ricker-­‐Gilbert,  2013).  

∂y∂s

= ∂y∂h(s,z)

⋅ ∂h(s,z)∂s

Average  parMal  effects    of  subsidized  seed  (s)    

on  outcomes  (y)  

Outcome  variable  EsMmated  change  per    

10-­‐kg  increase  in  subsidized  seed  Maize  produc/on   +106  kg  Income   +1.1%  Poverty  severity   -­‐0.7  percentage  points  Rela/ve  depriva/on  (income)   -­‐0.4%  

Other   factors   constant,   an   increase   in   subsidized   hybrid   maize   seed  leads  to  modest  improvements  in  all  household  outcomes  examined.      

The   authors   acknowledge   financial   support   from   the   United   States  Agency   for   Interna/onal   Development   Mission   in   Zambia.   Any   views  expressed   or   remaining   errors   are   solely   the   responsibility   of   the  authors.    

Note:  All  differences  are  sta/s/cally  significant  at  the  1%  level.  

Note:  Es/mates  are  sta/s/cally  significant  at  the  10%  level  or  lower.    

Dependent  variable   DistribuMon   EsMmator  Hybrid  seed  demand   Corner  solu/on   CRE  truncated  normal  hurdle  Maize  produc/on   Con/nuous   FE  

Income   Con/nuous   FE  Severity  of  poverty   Propor/on   CRE  frac/onal  response  Rela/ve  depriva/on   Con/nuous   FE  

Control   funcMon   (CF)   methods   are   used   to   test   and   control   for  endogeneity.    Test  results  suggest  that  subsidized  seed  is  endogenous  to  hybrid  maize  seed  demand  but  that  hybrid  seed   is  exogenous  to  all  of  the  outcome  variables  (p>0.10).    

Instrumental  variables:  •  Subsidized  seed:  =1  if  HH  head  is  related  to  the  village  headman/chief  • Hybrid  seed:  district-­‐level  cumula/ve  adop/on  of  F1  hybrids  (%  of  total  maize  area)