Agricultural inputs subsidy and their developmental impact

Conventional wisdom

A subsidy is defined as a payment, generally made from public
resources, that reduces the price that a buyer pays for a
good or service below the price at which the seller provides
it. The difference between the sellers’ price and the buyer’s
price is the amount of the subsidy.
A subsidy can be analyzed as a negative tax. The effect of a
subsidy on the quantity produced and the quantity consumed is
just the opposite of the effect of a tax – with a subsidy, the quantity
demanded of the subsidized good or service generally increase.1
Agricultural input subsidies are one of the most common subsidies
employed as policy instruments in the agricultural sector in order
to lower the prices that farmers pay for their inputs (such as fertilizer,
seed, and equipment) below their market prices.

Author: 
Takeshima, Hiroyuki
Lee, Hak Lim
Published date: 
2012
Publisher: 
International Food Policy Research Institute (IFPRI)
Series number: 
1
PDF file: 
application/pdf icon
mssppn1.pdf(240.8KB)