Credit Constraints and Capital Allocation in Agriculture: Theory and Evidence from Uganda

Konrad Burchardi, Benedetta Lerva, Jonathan de Quidt and Stefano Tripodi

No 21023, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Fertilizer adoption is persistently low among Sub-Saharan African farmers. Numerous governments have responded by introducing substantial price subsidies, but solving an allocation problem by introducing price distortions has unclear welfare implications. This paper presents results from a theory-guided experiment on fertilizer adoption among Ugandan farmers, finding that there exists a group of farmers with high returns to fertilizer, who would not adopt at the market price but can be induced to adopt with a 30% subsidy. Furthermore, consistent with adoption frictions due to liquidity constraints, the results indicate that a cash transfer is sufficient to eliminate the need for subsidies. These findings tie into broader ideas on second-best policymaking (Lipsey and Lancaster, 1956) and have important implications for fertilizer policy in Africa.

Keywords: Technology adoption; Second-best policy; Subsidies; Selective trials; Development (search for similar items in EconPapers)
Date: 2026-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21023 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:21023

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21023

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().