Agricultural input subsidies, credit constraints and expectations of future transfers: evidence from Haiti

We examine the effects of a subsidy program in Haiti which provided smallholders subsidies for modern inputs (rice seeds, fertilizer, pesticides and specific labor tasks) through 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 clarifications regarding their status in the program, we find evidence suggesting that incorrect expectations of future transfers help explain the disappointing outcomes. In addition, instead of increasing input use, subsidies seem to have led farmers to pay off their loans and take fewer new ones. In a complex postemergency environment 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.