Are they lemons? Unobservable quality, information, and mineral fertilizer demand

Fairbairn, Anna Marie

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https://hdl.handle.net/2142/98410 Copy

Description

Title

Are they lemons? Unobservable quality, information, and mineral fertilizer demand

Author(s)

Fairbairn, Anna Marie

Issue Date

2017-07-21

Director of Research (if dissertation) or Advisor (if thesis)

• Michelson, Hope
• Ellison, Brenna

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

• Fertilizer
• Tanzania
• Development
• Inputs
• Agriculture
• Input adoption
• Technology adoption
• Input quality
• Fertilizer quality
• East Africa
• Sub-Saharan Africa
• International development
• Agricultural development

Abstract

Though the record is clear that small farmers throughout Sub-Saharan Africa use mineral fertilizer at rates that are detrimentally low, an explanation circulating in these farming communities has not been verified. Producers in the region have voiced suspicion that fertilizer available to them in local shops, often acquired in small quantities from open bags rather than from bulk packages sealed by the manufacturer, has been diluted or adulterated; but their concerns are founded in hearsay rather than backed by reliable evidence. In this paper, we collect and test the quality of more than 800 mineral fertilizer samples acquired from 160 Tanzanian farmers and 225 agricultural input shops. Results from fertilizer nutrient content tests of these samples are combined with farmer and input dealer survey data. We find that mineral fertilizer is, on average, missing about 10% of advertised nitrogen. In addition, we find that more than 25% of purchased fertilizer exhibit observable quality problems such as caking, clumping, and powdering. Our results suggest the presence of an important quality inference problem in the market as we find that these observable mineral fertilizer quality characteristics misrepresent actual unobserved quality; in particular, observable physical quality characteristics do not predict missing nitrogen. Nevertheless, we find that farmers rely on observable characteristics to assess unobservable quality and that they are unwilling to purchase substandard-looking (but agronomically acceptable) mineral fertilizer unless it is sold well below the prevailing market price. Given the prevalence of suspicious-looking mineral fertilizer in the market, our results suggest that (1) quality degradation from poor supply chain management is likely at least as important as adulteration in these markets and (2) because of problems of incomplete information about quality, small-scale farmers may be purchasing and utilizing fertilizer at lower rates than optimal production requires.

Graduation Semester

2017-08

Type of Resource

text

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Copyright 2017 Anna Fairbairn

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