Input subsidies, credit constraints, and expectations of future transfers: Evidence from Haiti

Abstract

We examine the effects of a subsidy program in Haiti that provided smallholders subsidies for inputs (rice seeds, fertilizer, pesticides, and specific labor tasks) using a randomized control trial. The program led to lower input use and lower yields in the year subsidies were received, and the decline in input use and yields persisted through the following year. Using data from a complementary information intervention in which randomly selected farmers were provided clarification regarding their future receipt of vouchers, we find evidence suggesting that incorrect expectations of future transfers partially explain the disappointing outcomes. In addition, instead of increasing input use, the subsidies seem to have led farmers to pay off their loans and take fewer new ones. In complex post‐emergency environments such as the one in which this program took place, input subsidies may need to be avoided, as they require considerable information to optimally design and careful coordination by many actors to achieve the expected gains.