UM Professor Dean Yang, alongside Professor Michael Carter (University of California, Davis) and Rachid Laajaj (Universidad de los Andes) have just published “Subsidies, Savings and Sustainable Technology Adoption: Field Experimental Evidence from Mozambique.” Their policy relevant findings explore how to design subsidy and savings programs in Africa. While research on the impacts of programs implemented on their own continues to be significant, there is little known about multiple interventions that are implemented simultaneously. The authors examine these findings as well as the utility of general-purpose technologies versus targeted programs. To read the full article, click here!
Governments and aid agencies have invested substantial resources in input subsidies to accelerate technology adoption in developing-country agriculture. This paper reports results from a multi-year randomized controlled trial in Mozambique that explored the impact of temporary agricultural input subsidies on sustained technology uptake, alone and in combination with savings interventions designed to bolster the longevity of technology adoption by relaxing post-subsidy constraints to input purchases. A theoretical model of the risk-averse farm household, which faces liquidity constraints as well as incomplete insurance, shows that alleviating savings constraints in combination with a temporary subsidy intervention could either promote the post-subsidy persistence of technology adoption (dynamic enhancement), or reduce technology investment by encouraging savings accumulation for self-insurance and other purposes (dynamic substitution). Empirically, we find that subsidy-only recipients raised their fertilizer use in the subsidized season and for two subsequent unsubsidized seasons. Mean consumption rose apace, but so too did the sensitivity of consumption to agricultural shocks. By contrast, when paired with savings interventions, subsidy impacts on fertilizer use do not persist. Households shift resources away from fertilizer, instead accumulating savings in formal bank accounts. These empirical findings are consistent with the theoretical case of dynamic substitution of subsidies and highlight the continuing burden of uninsured risk as a barrier to adoption of improved technologies and income.
For more of Dean’s work, check out his homepage!