The effects of the Malawi Farm Input Subsidy Program on household per-capita consumption convergence

ABSTRACT

The Malawi Farm Input Subsidy Program (FISP) was praised for turning the country's food deficit into a surplus after inception in 2005. It is, however, not clear whether these food security gains spill over to equity in distribution of welfare. We examine the effects of the FISP on per-capita consumption convergence, on 2251 households interviewed in 2010–2013 Malawi Integrated Household Panel Survey. The analysis employs a Lewbel method of instrumental variables to account for non-random selection of beneficiaries into the programme. The results reveal that FISP helps relatively poor farmers increase household per-capita consumption towards converging to that of the relatively rich. This convergence is robust only among small but not large farmers. Past studies that evaluated the FISP while not paying attention to the welfare equity gains in household per-capita consumption, may have underestimated its benefits. Therefore, policy should support the programme with an additional objective of reducing inequality, beyond the primary aim of enhanced food security. Considering that the effects of FISP are limited to small farmers, alternative interventions such as inputs for credit should be made available to large farmers. This will allow FISP to induce widespread welfare gains.

KEYWORDS:

• Farm input subsidy
• household per-capita consumption
• welfare
• Malawi
• sub-Saharan Africa

JEL Classifications:

• G38
• 013
• 020
• Q18

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 USD 20.27 at the exchange rate of MWK 740 per dollar.

2 All information about FISP implementation provided here has been obtained from the publicly available programme implementation documents within the Ministry of Agriculture in the government of Malawi.

3 Taking a current exchange rate of 1 USD to MWK 780, readers can calculate the approximate cost of fertiliser in respective growing seasons in current terms. Inflation and rising costs of commodities should be considered during these calculations.

4 Note that this categorisation is done purely on an empirical basis and has nothing to do with selection into FISP criteria. The median landholding in our dataset was 0.517 hectares. Hence, small farmers are those with land below the threshold while large farmers are those above this threshold.

5 http://www.nsomalawi.mw/.

6 https://catalog.ihsn.org/index.php/catalog/6160.

Additional information

Notes on contributors

Martin Limbikani Mwale

Martin Limbikani Mwale is a PhD candidate at the Economics Department of Stellenbosch University. He is a development Economist by profession and training. Martin graduated with a first degree in Economics at the University of Malawi and proceeded to work for Malawi Government. He spent three years working as a Monitoring and Evaluation Specialist under the Department of Economic Planning and Development, particularly in the Programmes, Projects, and Social Economic Policy division. He returned to the academia in pursuit of a master's degree in Cooperation and Development at the University of Pavia in Italy, graduating in 2016. He then went to Stellenbosch University pursuing Honours in Economics and graduated in 2018. Martin proceeded with a master's in economics and graduated in 2019-Cum laude at the same University.

Tony Mwenda Kamninga

Tony Mwenda Kamninga holds a Master of Arts degree in Economics from the University of Malawi, Chancellor College. He is a Research and Policy Associate with the African Institute for Development Policy (AFIDEP), an African-led, non-profit research and policy institute established to help bridge the gaps between research, policy and practice in development efforts in Africa. Tony's research interest is in applied Microeconometric Analysis, Poverty and Inequality, Economics of Migration and Economics of Health.

Lucius Cassim

Lucius Cassim is a lecturer in economics at the University of Malawi. A Malawi national, he obtained his Master's degree in economics and a Bachelor's degree in Social Science from the University of Malawi. His research interests are in theoretical financial econometrics and financial economics.