Input- vs. Output-Based Farm Subsidies in Developing Economies: Farmer Welfare and Income Inequality

Christopher S. Tang, Yulan Wang, Ming Zhao

Research output: Chapter in book / Conference proceedingChapter in an edited book (as author)Academic researchpeer-review


To alleviate farmer poverty in developing economies, two common farmer subsidy schemes are either input-based that intends to reduce farmers’ input purchasing costs or output-based that aims to lower farmers’ output processing costs. By analyzing a stylized model that captures yield heterogeneity across farmers who engage in quantity competition, we find that both schemes can improve farmers’ income. However, these two schemes generate different effects. First, the input-based subsidy scheme narrows the income gap between farmers, but the output-based scheme widens this gap. Second, the output-based subsidy scheme outperforms the input-based subsidy scheme in terms of total farmer income and farmer productivity. Overall, we find that low-yield farmers prefer input-based subsidies, while high-yield farmers prefer output-based subsidies. These results continue to hold even when the farmer’s yield rate is uncertain.

Original languageEnglish
Title of host publicationSpringer Series in Supply Chain Management
PublisherSpringer Nature
Number of pages22
Publication statusPublished - Jan 2022

Publication series

NameSpringer Series in Supply Chain Management
ISSN (Print)2365-6395
ISSN (Electronic)2365-6409


  • Farm subsidies
  • Income inequality
  • Socially responsible operations

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Management Science and Operations Research
  • Control and Optimization


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