Voucher System and Agricultural Production in Tanzania: Is the Adopted Model Effective? Evidence from Panel Data Analysis

Abstract

One of the policy measures adopted in the recent past by the government of Tanzania
during the implementation of the Agricultural Sector Development Program (ASDP) is
to subsidize fertilizer and other agricultural inputs through the National Agricultural
Input Voucher system (NAIVS). Poor smallholder farmers who are the beneficiaries of
NAIVS are expected to increase crop productivity per unit area, and hence reduce
extensive farming/shifting cultivation. This paper presents empirical results on the
effects of the NAIVS on crop production in some selected regions in Tanzania. The study
used the panel data analysis technique to analyse agricultural data collected in year
2007 (before the NAIVS) and 2012 (during the NAIVS). In addition, the propensity
score matching (PSM) technique was employed to estimate the average effect of the
program on maize production. The study found a statistically significant difference
between crop harvest by households with and without access to the NAIVS. For the
maize harvest in 2012, households who accessed fertilizer through the NAIVS had more
harvest than households who did not access the NAIVS. However, the study found that
a majority of poor smallholder farmers do not access the NAIVS due to high market
price of inputs not well compensated by the static low value of the NAIVS. This implies
that the NAIVS is benefiting more well-off households than poor ones. The implication
from this finding is that the NAIVS is not achieving the intended objective of increasing
crop productivity by poor smallholders.  

Keywords: fertilizer subsidy, crop productivity, panel data analysis.