Browsing by Subject "Fertilizer quality"

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Fertilizer quality and its impacts on technical efficiency and use intensity in the North China Plain
(2014) Khor, Ling Yee; Zeller, Manfred
There has been a significant increase in agricultural output in the past 50 years. A major factor of this growth is the rise in input use such as fertilizer, especially during the beginning of this period. However, the trend is not uniform throughout the world. Even though there are still regions where fertilizer can contribute greatly to the increase in yield, this input is so overused in some other places that its marginal productivity is no longer significant. In this case, not only is it a waste of valuable resources, it also leads to environmental degradation and pollution that is detrimental to human health. To make matters worse, the quality of the agricultural input itself has been of increasing concern lately. It includes problems such as normal seed being sold as hybrid seed, pesticide that is mixed with less effective chemicals, or fertilizer which contains less nutrient than that labeled on the package. We focus our research on the North China Plain, a region with both fertilizer overuse and fertilizer quality problems. The issue of low fertilizer quality is however not confined to this region only, as recent news reports have indicated that substandard or fake agricultural input is a problem in other countries as well, for example Bangladesh, Cambodia, Nigeria, Tanzania, and Vietnam. In addition, although the analysis presented in this dissertation concentrates on fertilizer, some of the methodology can also be extended to examine the impact of other agricultural inputs with questionable quality, such as seed and pesticide. The main theme of our study is split into three subtopics: efficiency, wealth effect, and use intensity, with each of them focusing on a different aspect of the impact from low quality fertilizer. The main contribution of this dissertation is that despite the widespread problem of fertilizer quality, we believe we are the first to examine its impact both theoretically and empirically on efficiency and use intensity. The theoretical contribution includes deriving the bias that exists if one were to ignore the quality aspect in the estimation of production functions and technical efficiency, especially if the research area is located at one of the places with fertilizer quality problems, such as China and the other affected countries. We also provide a theoretical framework that reconciles the different findings in the literature on the direction of wealth effect on fertilizer use. It offers a consistent explanation on why the wealth effect can be different when we are looking at regions or farmers of different wealth levels. Empirically, the dissertation quantifies the magnitude of estimation bias in input elasticity and technical efficiency in our research region of North China Plain. It also supports our theoretical derivation and shows that the direction of wealth effect is not fixed across farmers of different wealth levels. Finally, the integration of fertilizer testing into a household survey allows us to look closer at the link between perceived and true fertilizer quality, as well as how they affect the fertilizer use intensity of the farmers. The worsening fertilizer quality issue in the North China Plain is of great concern because - as this dissertation research shows - it leads to an increase in fertilizer use, which is already excessive in the area. This is not only a waste of valuable resources reducing economic efficiency but also causes environmental and health problems, e.g. through pollution of ground water. The currently implemented policy of subsidizing the fertilizer manufacturers is a double whammy in this regard because by keeping the price of the product low, it encourages the usage of an input that is already overused. It also makes the quality control of the fertilizer in the market more difficult, with the presence of so many small scale producers that are inefficient. In view of these deficiencies, it would be better to shift the policy focus from price reduction to quality improvement. A suggestion is to facilitate the award of quality labels to satisfactory products with regular third-party testing of the fertilizer to ensure that its quality does not deteriorate after receiving the label. The honest producers in the industry could also help set up a sector-wide monitoring body to prevent their image from being tarnished by the less responsible manufacturers. An additional recommendation is to increase the resources and staff available to extension service in order to increase the information flow between policymakers and farmers.