A Crossed Analysis of Participations in Labor and Grain Markets: Evidence from Malawi

Abstract

Abstract This study contributes to the literature on the identification of factors shaping the decision to participate in the grain market in Africa. Unlike previous studies, we introduce labor market participation into the farm household model to highlight heterogeneities in decision making. Empirically, we rely on an extension of Heckman's approach and introduce control functions to mitigate endogeneity issues related to the adoption of agricultural technologies. We find that limited access to transportation infrastructure, by discouraging the supply of grain, constrains households to experience an excess of labor; price incentives may have a reverse effect on the choice of market regimes, even though the effect on production may be positive for households that are already participants. We also show that farmers' responses to grain prices are not sensitive to their labor market position. The use of agricultural technologies encourages cereal production and employment of external agricultural labor. This study thus provides a better targeting when designing policies promoting marketing and rural employment.