Duflo, Kremer, and Robinson, “Nudging Farmers to Use Fertilizer…” (2014)

Esther Duflo, Michael Kremer, and Jonathan Robinson, “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya.” American Economic Review 101: 2350-2390, October 2011.

• The (limited) use of fertilizer seems to hold very high returns – both social returns and private returns. Why do so many farmers not apply fertilizer, when it would seem to be in their private interest to fertilize? Behavioral biases, perhaps – and in particular, procrastination. 

• Some farmers are only partially sophisticated, overestimating the probability that they will be patient in the future. Calibrations suggest nearly 50% fit this category. These farmers might choose to postpone fertilizer purchase, fully expecting to buy it later, and then fail to follow through on their plan. 

• Offering small, time-limited fertilizer discounts just after harvest (when farmers have cash) can significantly increase purchase by such partially sophisticated farmers. 

• The use of a second dose of fertilizer has negative social returns, but farmers might administer a second dose if the price is highly subsidized. Hence a small, time-limited discount might be a better policy than large subsidies, even if the large subsidies spur fertilizer use, too. 

• Small, time-limited discounts have other advantages. First, they are not that demanding upon the public purse; second, if fertilizer isn’t really such a good idea, if it has negative returns, farmers probably won’t administer it (which is the socially efficient behavior under the negative-returns circumstances). The small subsidy limits the possibility that socially-excessive amounts of fertilizer will be applied.