Assessing the impact of fertilizer subsidy on farming efficiency: A case of Bangladeshi farmers

Abstract

The study has been conducted to assess the micro level impact of fertilizer subsidy on farming efficiency given the heterogeneous farm structures and universal subsidy policy in Bangladesh. The research utilizes primary data, which were collected through personal interview of 300 farm households located in three districts from northern part of Bangladesh. Multistage purposive sampling was followed for selecting the sampling units based on concentration of rice farming. Data Envelopment Analysis (DEA) reveals that the farms are inefficient in combining inputs in a cost minimizing way, although they are technically more efficient. Results from Tobit models for different farm size groups prove that fertilizer subsidy has significant impact on improving farming efficiencies for marginal and small farms in study areas while leaving insignificant impact for medium and large farms. Further increases in fertilizer subsidy will bring significant productivity increases for these smallholder farmers. Therefore, policy interventions should favor these farms for acceleration of agricultural growth.