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 Tanzaniaduring the implementation of the Agricultural Sector Development Program (ASDP) isto subsidize fertilizer and other agricultural inputs through the National AgriculturalInput Voucher system (NAIVS). Poor smallholder farmers who are the beneficiaries ofNAIVS are expected to increase crop productivity per unit area, and hence reduceextensive farming/shifting cultivation. This paper presents empirical results on the effects of the NAIVS on crop production in some selected regions in Tanzania. The studyused the panel data analysis technique to analyse agricultural data collected in year2007 (before the NAIVS) and 2012 (during the NAIVS). In addition, the propensityscore matching (PSM) technique was employed to estimate the average effect of theprogram on maize production. The study found a statistically significant differencebetween crop harvest by households with and without access to the NAIVS. For themaize harvest in 2012, households who accessed fertilizer through the NAIVS had moreharvest than households who did not access the NAIVS. However, the study found thata majority of poor smallholder farmers do not access the NAIVS due to high marketprice of inputs not well compensated by the static low value of the NAIVS. This impliesthat the NAIVS is benefiting more well-off households than poor ones. The implicationfrom this finding is that the NAIVS is not achieving the intended objective of increasingcrop productivity by poor smallholders.  Keywords: fertilizer subsidy, crop productivity, panel data analysis.