Who Is Benefiting from Fertilizer Subsidies in Indonesia?

Using the Agricultural Census 2003 and
the Rice Household Survey 2008 for Indonesia, this paper
analyzes the distribution of benefits from fertilizer
subsidies and their impact on rice production. The findings
suggest that most farmers benefit from fertilizer subsidies;
however, the 40 percent largest farmers capture up to 60
percent of the subsidy. The regressive nature of the
fertilizer subsidies is in line with research carried out in
other countries, the result of larger farms using a larger
volume of fertilizer. This paper confirms that fertilizer
used in adequate quantities has a positive and significant
impact on rice yields, but it also provides evidence that
over-using fertilizer has an adverse impact on yields (an
inverted U-curve relationship).