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 Tanzania during the implementation of the Agricultural Sector Development Program (ASDP) is to subsidize fertilizer and other agricultural inputs through the National Agricultural Input Voucher system (NAIVS). Poor smallholder farmers who are the beneficiaries of NAIVS are expected to increase crop productivity per unit area, and hence reduce extensive farming/shifting cultivation. This paper presents empirical results on the effects of the NAIVS on crop production in some selected regions in Tanzania. The study used the panel data analysis technique to analyse agricultural data collected in year 2007 (before the NAIVS) and 2012 (during the NAIVS). In addition, the propensity score matching (PSM) technique was employed to estimate the average effect of the program on maize production. The study found a statistically significant difference between crop harvest by households with and without access to the NAIVS. For the maize harvest in 2012, households who accessed fertilizer through the NAIVS had more harvest than households who did not access the NAIVS. However, the study found that a majority of poor smallholder farmers do not access the NAIVS due to high market price of inputs not well compensated by the static low value of the NAIVS. This implies that the NAIVS is benefiting more well-off households than poor ones. The implication from this finding is that the NAIVS is not achieving the intended objective of increasing crop productivity by poor smallholders.