Cash constraints and sticky input expenditures: experimental evidence from Malawi
The seasonality of rain-fed agricultural production which dominates in Malawi make food shortages seasonal and food has to be stored from one harvest season and up to the next harvest season. This study investigates the willingness of rural households in Malawi to allocate funds for input purchase at harvest time and whether this willingness is as high or higher at harvest time than at planting time. Rural households do not face food shortages at harvest time and may then be more willing and able to spend funds on inputs. On the other hand, net buyers of food may still prefer to buy additional food at harvest time when food prices are at their lowest.
Experiments were run at harvest time and planting time to assess how a given budget was allocated for inputs or for food. Households were found to be willing to spend a significantly higher proportion of a given budget on inputs at planting time than at harvest time. The study revealed that rural Malawian households value fertilizers highly even though they have been exposed to very high fertilizer subsidies over several years. More than 50 percent of the households preferred small amounts of fertilizer to a cash amount that was 50 percent higher than the current commercial price for fertilizer during experiments carried out in 2009. A large gap betweenwillingness to pay (WTP) and willingness to accept compensation (WTA)prices still supports that input sales at harvest time may enhance input investments.