Income inequality in developing countries has received a lot of
attention in the literature but little is known about the role of
large scale farm input subsidy programs in promoting equity in
income distribution. We fill this knowledge gap by analyzing the
impact of Malawi’s farm input subsidy program (FISP) on income
inequality. Specifically, we test the hypothesis that FISP has no
effect on income inequality in Malawi.
In terms of scope and coverage, FISP is perhaps the most wellknown
agricultural input subsidy program in Africa. It currently
provides inorganic fertilizers and improved maize and legume
seeds to over 50% of rural, smallholder farmers at hugely
subsidized prices (about 95% subsidy). Each beneficiary is
entitled to 50kg of Urea; 50kg of NPK 23:21:0; 5kg of improved
maize seed or 10kg of open pollinated variety maize seed; and a
kilogram of legume seed (Kilic et al., 2014). Officially, FISP has
two main objectives: 1) ensuring household food security and
national food sufficiency through increased food production; and
2) reducing poverty by increasing the income levels of
beneficiaries (Chirwa and Dorward, 2010). Although FISP is not
designed to directly promote equity in income distribution, the
pro-poor focus of the program suggests that with effective
targeting of the inputs income inequality can be curtailed. This
analysis will complement other papers that focused on the
impacts of FISP on agricultural production and household welfare
indicators in promoting the effectiveness of large scale farm
input subsidy programs in Africa and other developing countries.