Original article by Michael Kremer, Esther Duflo, and Jon Robinson
In this experiment, Esther Duflo, Michael Kremer, and Jonathan Robinson investigate why it is that farmers in Kenya don’t use as much fertilizer as they could.
Fertilizer has the potential to make a large difference in their harvest, but farmers might use less than they should because of very small, human obstacles to purchasing it. They might be putting off going into town to buy the fertilizer because it’s far and a hassle. The authors find that when a very small obstacle is removed, by providing the fertilizer with free delivery, take-up increases drastically. This supports the idea of policy “nudges:” small changes in incentives that end up with the potential to have outsized impacts on outcomes.
While many developing-country policymakers see heavy fertilizer subsidies as critical to raising agricultural productivity, most economists see them as distortionary, regressive, environmentally unsound, and argue that they result in politicized, inefficient distribution of fertilizer supply. We model farmers as facing small fixed costs of purchasing fertilizer, and assume some are stochastically present-biased and not fully sophisticated about this bias. Even when relatively patient, such farmers may procrastinate, postponing fertilizer purchases until later periods, when they may be too impatient to purchase fertilizer. Consistent with the model, many farmers in Western Kenya fail to take advantage of apparently profitable fertilizer investments, but they do invest in response to small, time-limited discounts on the cost of acquiring fertilizer (free delivery) just after harvest. Later discounts have a smaller impact, and when given a choice of price schedules, many farmers choose schedules that induce advance purchase. Calibration suggests such small, time-limited discounts yield higher welfare than either laissez faire or heavy subsidies by helping present-biased farmers commit to fertilizer use without inducing those with standard preferences to substantially overuse fertilizer.
Kremer, Michael, Esther Duflo, and Jon Robinson. 2011. “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya.” American Economic Review 101 (6 (October 2011): 2350-90.