How Does Market Access Affect Smallholder Behavior? The Case of Tobacco Marketing in Malawi

Tinbergen Institute Discussion Paper 12-088/V

64 Pages Posted: 4 Sep 2012 Last revised: 28 Aug 2014

See all articles by Wouter Zant

Wouter Zant

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: August 25, 2014

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.

Keywords: transaction costs, market access, subsistence, food & cash crops, Malawi, Africa

JEL Classification: D23, O13, O55, Q11, Q13

Suggested Citation

Zant, Wouter, How Does Market Access Affect Smallholder Behavior? The Case of Tobacco Marketing in Malawi (August 25, 2014). Tinbergen Institute Discussion Paper 12-088/V, Available at SSRN: https://ssrn.com/abstract=2141144 or http://dx.doi.org/10.2139/ssrn.2141144

Wouter Zant (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
69
Abstract Views
594
rank
393,614
PlumX Metrics