Agricultural Resources and Trade Strategies: Response to Falling Land-to-Labor Ratios in Malawi

Sarah Ephrida Tione

doi:10.3390/land9120512

Abstract

This study assesses how growing land scarcity relative to family labor is influencing farm household decisions to trade in agricultural land and labor markets to improve their livelihood. Using the farm household model, I analyze decisions to rent-in land or hire out labor among smallholders in Malawi. I use data from two rounds of a nationally representative balanced-household panel and apply a systems approach to jointly estimate land rental and labor market decisions while controlling for simultaneity and unobserved heterogeneity. The results indicate that the falling owned-land-to-labor-endowment ratio can push households to participate in either land rental or seasonal agricultural labor markets. However, the probability of hiring out labor for casual work and short-term gains decreases when potential tenant households rent-in land. Based on asset-wealth-to-labor-endowment ratios, wealthier households are more likely to rent-in land while poorer households, including most smallholder households, are more likely to hire out labor. These results suggest higher friction in the land rental market compared to the agricultural labor markets and liquidity constraints dictating what is necessary to support agricultural operations and household needs. Accordingly, agricultural policy in Malawi should aim to reduce friction in factor markets.

Highlights

Agricultural land in sub-Saharan Africa (SSA) has generally trended from abundance towards scarcity, mainly from population growth [1,2]
Discussion of the results mainly focuses on the joint correlated random effects (CRE) models presented in Tables 3 and 4
This study did not focus on gender dynamics in the resource factor markets, the results presented in the appendix demonstrate that female-headed households were less likely to hire out labor for casual work, which differs from the previous literature

Summary

Introduction

Agricultural land in sub-Saharan Africa (SSA) has generally trended from abundance towards scarcity, mainly from population growth [1,2]. Land scarcity is challenging for farm households in SSA that rely on land and labor factors of production for income and food security [3,4], with the extant literature indicating a declining owned-land-to-labor-endowment ratio among farm households, especially in areas of SSA with high population densities [5,6]. This change has resulted in farm households using more family labor relative to their farmland due to imperfections in the labor market and limited opportunities to trade their labor outside the agricultural sector [5,7].

Objectives

Results

Discussion

Conclusion