Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145361
Authors: 
Zant, Wouter
Year of Publication: 
2016
Series/Report no.: 
Tinbergen Institute Discussion Paper 16-054/V
Abstract: 
Transaction costs play a key role in the behaviour of smallholders in developing countries. We investigate smallholder tobacco cultivation in Malawi, Malawi’s major export crop, and exploit the introduction of an additional tobacco auction floor to measure the impact of a reduction in transaction costs on smallholders’ decisions on tobacco crop area and production. Estimations are based on annual data by Extension Planning Area, from the Ministry of Agriculture and Food Security, combined with data from other sources. A 10% reduction in transport cost is shown to lead to an increase in crop area and production of around 4% and 2.5%, respectively. Supply response runs along the extensive margin: both area and production increase, but production slightly less, leading to a decrease in yield, most likely because tobacco cultivation expands to less suitable areas and/or less productive farmers. In view of the non-experimental nature of the data, we confirm impacts by estimating a dose response function using generalised propensity scores. Supply response increases substantially within a distance to auction floor of less than 60km. We find no empirical support for conversion of crop area from maize and other crops into tobacco.
Subjects: 
transaction costs
market access
subsistence farming
food & cash crops
Malawi
Africa
JEL: 
D23
O13
O55
Q11
Q13
Document Type: 
Working Paper

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