The sequencing of agricultural market reforms in Malawi

Abstract

The paper analyses the welfare impacts of alternative sequencing scenarios of agricultural input and output market reforms in Malawi using a profit maximisation approach. After a review of the literature on the sequencing of agricultural market reforms, the agricultural sector in Malawi is described and its history of market reforms is summarised. Subsequently, a normalised quadratic profit function, with maize and groundnuts as the main competing outputs and fertiliser and labour as the major variable inputs, is estimated. The simulation results using the coefficients of the estimated normalised quadratic profit function show that, contrary to the sequencing path adopted in the 1980s, Malawi's government should have liberalised the maize sector first, followed by the groundnut export sector, and once a supply response was generated, input subsidies could have been phased out. This sequence would have minimised the adjustment costs of smallholder farmers and would have reduced the negative impact on maize productivity and food security. Copyright 1999 by Oxford University Press.