Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 337: Does Fertilizer Use Respond to Rainfall Variability? Panel Data Evidence from Ethiopia

Yonas Alem (), Mintewab Bezabih (), Menale Kassie () and Precious Zikhali ()
Additional contact information
Yonas Alem: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Mintewab Bezabih: Department of Economics, University of Portsmouth, UK
Menale Kassie: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Precious Zikhali: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

Abstract: In this paper we use farmers' actual experiences with changes in rainfall levels and their responses to these changes to assess if patterns of fertilizer use are responsive to changes in rainfall patterns. Using plot and farm level panel data from the central Highlands of Ethiopia matched with corresponding village level rainfall data; results show that both the current year’s decision to adopt and the intensity of fertilizer adoption is positively associated with higher rainfall levels experienced in the previous year. Furthermore, we find a concave relationship between previous season rainfall levels and fertilizer adoption, indicating that too much rainfall discourages adoption. Abundant rainfall in the previous year could depict relaxed liquidity constraints and increased affordability of fertilizer, which makes rainfall availability critical in severely credit constrained environments. In light of similar existing literature, the major contribution of the study is its use of plot level panel data, which permits us to investigate the importance of plot characteristics in fertilizer adoption decisions.

Keywords: Fertiliser adoption; Rainfall; Highlands of Ethiopia; Panel data

JEL-codes: O12; O33; Q12; Q16; Q54

22 pages, January 5, 2009

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