What are the effects of input subsidy programs on maize prices? Evidence from Malawi and Zambia

An important hypothesized benefit of large-scale input subsidy programs in Africa is that by raising maize production, the subsidies should put downward pressure on retail maize prices to the benefit of urban consumers and the rural poor who tend to be net food buyers. To inform debates related to this rationale for input subsidies, this study estimates the effects of fertilizer subsidies on retail maize prices in Malawi and Zambia using market or district-level panel data covering the 2000–2001 to 2011–2012 maize marketing years. Results indicate that roughly doubling the size of Malawi's subsidy program reduces maize prices by 1.2–2.5% on average. In Zambia, roughly doubling the scale of the country's subsidy program reduces maize prices by 1.8–2.8% on average. The results are robust across countries and model specifications, and indicate that the fertilizer subsidy programs in Malawi and Zambia have had a minimal effect on retail maize prices.