Does access to markets improve livelihood of rural

households?

Case study of smallholder farmers in rural Malawi

Is poverty an issue in Malawi?

• Poverty levels still very high despite investments.– Example :Even with huge investment in FISP poverty levels only

reduced by two percentage points.

• Majority of population in Malawi rely on Agriculture.– Policies have favored reducing food security and increasing agri.

Productivity.

• How can poverty level be reduced with Agriculture as a base?

• The livelihood framework provide some insights.

Social

Capital

Political Capital

The Livelihood framework.

Investments in crop prod.

High yield(Qp>Qc)

Increased output sales

Increased income

purchase of other

capitals

Natural Resources

CapitalFinancial Capital

Physical Capital

Human Capital

Objectives of the paper

• Linking the livelihood framework through market participation.

• Purchase of physical items is a result of selling agricultural output (maize) on the market.

• We use three items:– Ownership of cell phone.– Ownership of electrical equipment.– Ownership of at least two pairs of new clothes by

household members.

Data and sources• Sample: 607

households– Karonga: 196– Salima:200– Chikhwawa:211

• 2013/14 growing season.

• CIMMYT DTMA project

Descriptive statisticsVariable Households did not sale

maize in 2013/14 season (N=621)

Household sold Maize on 2013/14 season

(N=168)Mean Std. Dev. Mean Std. Dev.

Total maize harvested (kg) 381.49 495.39 832.94 677.10

Total labor cost(MKw) 57,06.18 20,005.95 84,34.52 19,712.49

Total land endowment (acres) 3.57 2.52 4.21 3.22

Age of purchased seed (years) 2.98 3.28 2.72 3.07

Fertilizer applied (kg) 19.04 25.05 37.18 39.03

Total household size 5.79 2.31 5.36 2.12

Number of household dependents

4.01 2.24 3.56 1.98

Descriptive statisticsVariable No Yes

total maize harvested

(kg)

Total maize sold

(kg)

total maize harvested

(kg)

Total maize sold (kg)

household owning a cell Phone 471.72 34.83 541.88 123.35

(597.5358) (110.4071) (559.2854) (749.9935)

Own and electric asset 372.59 24.37 558.32 84.88

(371.9603) (114.0142) (662.4301) (537.618)

Own at least two pairs of clothes 360.02 16.33 565.61 88.71

(555.2711) (113.2879) (589.5379) (535.886)

Analytical framework

• Do households that sale maize on the market have a higher probability to purchase physical

items for the household?

• Probit Model

• Where parameters reflects the impacts of changes in (maize sold) on the probability of the household purchasing physical items .

,10Pr

,1Pr

mm

mm

QFQPc

QFQPc

mQ

Pc

Analytical framework• 1)OLS on Production function (Cobb-Douglas)

• 3)Instrumental variable probit (ivprobit) with control function

VeQQ

uXQPc

vppm

m

01

ClSZVarXXAfQ lafp ,,,,,

The production equation Total Maize production (kg)Standard Error Coefficient

Log Fertilizer applied (kg) -0.04 0.137****Log total labor cost (MKw) -0.01 0.0000Log manure applied (kg) -0.02 0.104****Log plot size (Acres) -0.09 0.448****Age of seed (years) -0.03 -0.015Total household size -0.15 0.270*Number of dependents in the household

-0.16 -0.308**

irrigated -0.19 0.515***Number of observations. 807R-squared 0.123

Factors affecting households ability to purchase physical items

Clothes (2 pairs)

Electric item

cell phone

Log Maize sales 0.359**** 0.325**** 0.200**

(0.06) (0.06) (0.10)

Household head age (years) -0.006* -0.002 -0.005

(0.00) (0.00) (0.00)

Number of schooling of household head (years)

0.030 0.021 0.099****

(0.02) (0.02) (0.03)

Age of maize seed -0.011 -0.013 -0.049**

(0.02) (0.02) (0.02)

Discussion

• Accessing other capitals is the root to reduce poverty (the livelihood framework).

• Accessing markets is good to transform agricultural products into other assets.

• Other assets can be used to increase productivity.

Conclusion• Therefore, food security policy objectives are

necessary, but not sufficient to reduce poverty.

• Policies that allow fungibility of agricultural outputs, can ensure that reduction of poverty in the rural Malawi.

Thank you !!!