Abstract
Restricting cross-border trade through export bans in an attempt to stabilize domestic prices has been a particularly popular policy tool used by many sub-Saharan countries in recent years. However, little is known about how the variability in harvests and seasonality -- two critical dimensions of smallholder agriculture in Africa -- mediate the effects of export bans on household welfare. This study assesses the short-term impact of export bans on prices and welfare of households in Malawi, accounting for these heterogeneities. It uses monthly panel data on maize prices from 152 markets in Malawi and neighboring countries. To identify the impacts of the bans, the study compares the change in price dispersion between a domestic market in Malawi and another market in a neighboring country, relative to the price dispersion between the domestic market and other markets within Malawi that are at a similar distance as the domestic-foreign market pair. The findings show that export bans, in the short run, are associated with lower domestic prices, lower relative prices, and less seasonality in prices in Malawi. This is after accounting for harvest levels and the existence of trade restrictions in neighboring countries. The short-run effects of the export bans help explain why policymakers are likely to engage in the use of such policies. However, the welfare analysis shows that the welfare gains and poverty reduction effects are small in magnitude and likely to be offset by the long-run distortionary effects of restrictive trade policies.
Highlights
As a crucial staple crop in Eastern and Southern Africa, the production and marketing of maize have been the focus of governments’ food security and poverty alleviation strategies
A comparison of the domestic price levels in Malawi during periods of export ban and prices observed when no ban is in place, without accounting for harvest differences and trade regimes in neighboring countries, seems to incorrectly imply that prices are higher as a result of the export ban
Results from regression Model 1 show that export bans are associated with a higher relative price in Malawi of nearly 11 percent
Summary
As a crucial staple crop in Eastern and Southern Africa, the production and marketing of maize have been the focus of governments’ food security and poverty alleviation strategies. In the wake of the 2007-08 food price spike, these countries renewed their efforts to intervene and regulate agricultural markets with the objectives of ensuring domestic food security and price stability Such measures included a slew of trade of controls such as temporary restrictions on exports of food grains and other staples (Sharma, 2011) as well as active interventions in the grain markets through price regulation, direct purchases, storage, and other discretionary policies (Chapato and Jayne, 2009). The data and the empirical strategy that we use in this study allows us to overcome these challenges and isolate the short-run effects of the trade policies on maize prices and, subsequently, the welfare implications for maize producers and consumers in Malawi. The results suggest that export bans, in the short run, are associated with lower domestic prices, lower relative prices, and less seasonality in prices in Malawi, after accounting for harvest levels and the existence of trade restrictions in neighboring countries. The subsequent section presents the results of the analysis, and we conclude with a discussion and policy implications in the final section
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