Economic Analysis and African Responses to Price

Abstract

is applicable throughout the world or relevant only in developed countries with large and complex markets. I wish to deal with one aspect of this important question, the supply responses of agriculturalists in underdeveloped countries, especially in Africa. Commentators on this problem may be divided, conveniently if somewhat arbitrarily, into three camps. First, some scholars, including George Dalton, believe that noneconomic factors in African and Asian societies are so important that many aspects of economic theory are irrelevant or misleading [6, pp. 373-374; 16]. Scholars of this persuasion often believe that supply curves are either nonexistent or backward bending. Secondly, other writers, including Deena Khatkhate, are also persuaded that supply curves are backward bending, but use arguments based on economic theory to support their belief [11, p. 386; 13, p. 189]. A third group recognizes that backward bending supply curves are consistent with economic theory, at least in certain types of situations. But they argue that in fact forward bending supply curves are more likely to be found than backward bending ones [1, 2, 3, 5, 9, 14, 17]. In an attempt to shed some light, both theoretical and empirical, on this controversy, I will first apply economic theory to the peasant grown tobacco crop in Malawi. (Malawi was known as Nyasaland until it gained its independence in July 1964.) This analysis yields a plausible model of the behavior of the tobacco growers. Then, on the basis of the model, predictions are made regarding various supply relationships. The predictions are then tested by multiple regression analysis and, finally, the results of the tests are compared with each of the three hypotheses I have just mentioned. We will discover that the implications of tobacco growers' responses are not limited to the problem of crop supply curves. Fortunately, the same statistical results also have implications for labor supply curves, which is a problem of equal or perhaps even greater interest.