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How does Market Access affect Smallholder Behavior? The Case of Tobacco Marketing in Malawi

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  • Wouter Zant

    (VU University Amsterdam)

Abstract

Transaction costs play a key role in the behaviour of smallholders in developing countries. We exploit the introduction of an additional tobacco auction floor in Malawi to investigate the impact of a reduction in transaction costs and improved market access on production per hectare and the underlying smallholder’s decisions on production and cultivated area of tobacco, the major cash crop in Malawi. Given the non-experimental nature of the data we use matching and potential outcome models to identify impact. Estimations are based on annual data by Extension Planning Area, 198 in total, fully covering Malawi, for the period 2003-04 to 2009-10. The estimation results support a statistically significant positive impact of the introduction of a new auction floor on smallholders’ behaviour: production per hectare, production and area of tobacco has increased in the long run with respectively 20-25%, 36-38% and 15-21%. This outcome, and the increase in cultivated area in articular, suggests that lower transaction costs trigger smallholder farmers to shift to commercial agriculture.

Suggested Citation

  • Wouter Zant, 2012. "How does Market Access affect Smallholder Behavior? The Case of Tobacco Marketing in Malawi," Tinbergen Institute Discussion Papers 12-088/V, Tinbergen Institute, revised 25 Aug 2014.
    • Handle: RePEc:tin:wpaper:20120088
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    Cited by:

    1. Wouter Zant, 2018. "Trains, Trade, and Transaction Costs: How Does Domestic Trade by Rail Affect Market Prices of Malawi Agricultural Commodities?," The World Bank Economic Review, World Bank, vol. 32(2), pages 334-356.
    2. Kevin J. A. Thomas & Christopher Inkpen, 2013. "Migration Dynamics, Entrepreneurship, and African Development: Lessons from Malawi," International Migration Review, Wiley Blackwell, vol. 47(4), pages 844-873, December.

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    More about this item

    Keywords

    transaction costs; market access; subsistence; food & cash crops; Malawi; Africa;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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