We investigate the impacts of subsidies for technology adoption, and how savings constraints affect subsidy impacts. In a multi-treatment field experiment in rural Mozambique, households were randomly assigned one-time subsidies for adopting modern agricultural technology (chiefly fertilizer), while entire localities were later randomized into programs facilitating formal savings. In localities with no savings program, subsidy recipients raise their fertilizer use in the subsidized season and for up to two subsequent unsubsidized seasons, and raise their subsequent consumption levels, while also experiencing higher consumption variability. By contrast, in savings-program localities, subsidy impacts on fertilizer use are not persistent; instead, households shift resources away from fertilizer, towards savings buffer stocks and other investments. Eventual consumption gains in savings localities (for subsidy recipients as well as non-recipients), are as large as those experienced by subsidy recipients in no-savings localities, but with no increase in consumption variability. Reducing savings constraints attenuates the impact of technology adoption subsidies, while allowing households to pursue other paths to improved well-being, achieving similar consumption gains while coping with risk. |
