Scandinavian Working Papers in Economics

CLTS Working Papers,
Norwegian University of Life Sciences, Centre for Land Tenure Studies

No 6/13: Input subsidies and demand for improved maize: Relative prices and household heterogeneity matter!

Stein Holden ()
Additional contact information
Stein Holden: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway

Abstract: This study uses simple non-separable farm household models calibrated to household, market, farming and policy context conditions in Central and Southern Malawi. The models are used to simulate how household characteristics, design and access to input subsidies affect the demand for improved maize seeds; how increasing land scarcity affects the cropping system and demand for improved maize; and how access to improved maize seeds affects household welfare with varying access to input subsidies. The model simulations demonstrate that a) there is a high risk that access to subsidized improved maize seeds can crowd out commercial demand for improved maize seeds but the effect is very sensitive to household characteristics, market characteristics and relative prices; b) increasing land scarcity increases the demand for improved maize seeds and improved maize facilitates intensification among others through intercropping of maize with legumes such as beans and pigeon peas; c) the welfare effects depend on households’ ability to utilize the potential of the improved varieties by combining them with complementary inputs.

Keywords: Improved maize varieties; input subsidies; impact on seed demand; land scarcity; intensification; cash constraints; household welfare

JEL-codes: Q12; Q16; Q18

38 pages, June 3, 2013

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