Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya

Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya

July 2009 | Esther Duflo, Michael Kremer, Jonathan Robinson
This paper examines the effectiveness of nudging farmers to use fertilizer in Kenya, analyzing both theoretical and experimental evidence. The authors argue that farmers often face small fixed costs when purchasing fertilizer and may be present-biased, meaning they prefer immediate gratification over long-term benefits. Despite the potential profitability of fertilizer, many farmers delay purchases due to present bias, even when they are relatively patient. The study finds that farmers in Western Kenya often fail to take advantage of profitable fertilizer investments but do respond to small, time-limited discounts on fertilizer costs, such as free delivery just after harvest. These discounts can significantly increase fertilizer use, even more than larger subsidies. The authors propose a model of farmer decision-making influenced by present bias and time inconsistency. They find that a significant proportion of farmers are stochastically present-biased, meaning they may be patient in the short term but impatient in the long term. This leads to procrastination in purchasing fertilizer, even when it is profitable. The model suggests that small, time-limited discounts can help farmers commit to fertilizer use without causing overuse by more patient farmers. The study also tests the effectiveness of different interventions, including a subsidized fertilizer program and reminders. The results show that a small, time-limited discount on fertilizer costs, such as free delivery, can significantly increase fertilizer use. This approach is more effective than larger subsidies or standard fertilizer subsidies because it helps present-biased farmers commit to fertilizer use without causing overuse by more patient farmers. The authors conclude that a "paternalistic libertarian" approach, using small, time-limited discounts, can yield higher welfare than either laissez-faire policies or heavy subsidies. This approach helps stochastically hyperbolic farmers commit to fertilizer use while avoiding large distortions in fertilizer use among time-consistent farmers and the fiscal costs of heavy subsidies. The study highlights the importance of understanding behavioral biases in farmer decision-making and the potential of nudges to improve agricultural productivity and welfare.This paper examines the effectiveness of nudging farmers to use fertilizer in Kenya, analyzing both theoretical and experimental evidence. The authors argue that farmers often face small fixed costs when purchasing fertilizer and may be present-biased, meaning they prefer immediate gratification over long-term benefits. Despite the potential profitability of fertilizer, many farmers delay purchases due to present bias, even when they are relatively patient. The study finds that farmers in Western Kenya often fail to take advantage of profitable fertilizer investments but do respond to small, time-limited discounts on fertilizer costs, such as free delivery just after harvest. These discounts can significantly increase fertilizer use, even more than larger subsidies. The authors propose a model of farmer decision-making influenced by present bias and time inconsistency. They find that a significant proportion of farmers are stochastically present-biased, meaning they may be patient in the short term but impatient in the long term. This leads to procrastination in purchasing fertilizer, even when it is profitable. The model suggests that small, time-limited discounts can help farmers commit to fertilizer use without causing overuse by more patient farmers. The study also tests the effectiveness of different interventions, including a subsidized fertilizer program and reminders. The results show that a small, time-limited discount on fertilizer costs, such as free delivery, can significantly increase fertilizer use. This approach is more effective than larger subsidies or standard fertilizer subsidies because it helps present-biased farmers commit to fertilizer use without causing overuse by more patient farmers. The authors conclude that a "paternalistic libertarian" approach, using small, time-limited discounts, can yield higher welfare than either laissez-faire policies or heavy subsidies. This approach helps stochastically hyperbolic farmers commit to fertilizer use while avoiding large distortions in fertilizer use among time-consistent farmers and the fiscal costs of heavy subsidies. The study highlights the importance of understanding behavioral biases in farmer decision-making and the potential of nudges to improve agricultural productivity and welfare.
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