Political economy of agricultural producer support in Malawi

An econometric test of determinants of producer protection in the maize sector

Malawi has struggled to achieve sustained agricultural growth over the last four decades. As such there is need for in-creased investment and supportive policies if greater success is to be realized. As a prerequisite to identifying the role that improved policies and investment can play, a better understanding is needed of the incentives that producers in the agricultural sector obtain currently. However, research on the subject has been scanty. For this study, annual Producer Subsidy Equivalent (PSE) for the staple food crop, maize, were calculated for the period 1970 to 2010. All of the PSEs were negative, implying that agricultural producers have been implicitly and consistently taxed through policies that trans-fer income from producers to consumers. This is consistent with trends in developing countries – developing countries commonly tax the agricultural sector, while in contrast developed nations subsidize the sector. However, the annual value of the implicit tax on agriculture in Malawi per unit of production has declined over the years from US$298/mt in 1970 to US$182 in 2010. In order to understand the determinants of this observed pattern of declining implicit taxation, a Newey–West regression analysis was used to test political economy explanations for the changes in levels of agricultural protec-tion. Our research shows that implicit taxation on maize producers declined with increasing levels of social accountability and international donor pressure and with declining agricultural production.

Phiri, Horace
Edriss, Abdi Khalil
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International Food Policy Research Institute (IFPRI)
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