Impacts of the Farm Input Subsidy Programme in Malawi: Informal Rural Economy Modelling

Future Agricultures Working Paper 67
Andrew Dorward and Ephraim Chirwa
June 2013

This paper presents a partial equilibrium model of the impacts of the Malawi Farm Input Subsidy Programme on smallholder livelihoods in two major and contrasting livelihood zones over the period 2005/6 to 2010/11. Despite inherent difficulties in modelling the multi-scale and complex relationships that are involved, model findings show direct impacts on subsidy recipients (increasing maize production and real incomes), differences between poorer and less poor households (with poorer households normally gaining more proportionally but not necessarily absolutely from the same subsidy package), and differences between central and southern region maize growing areas with different rates of poverty incidence and land pressure (with greater absolute and proportional gains in poorer southern region areas). The results also show the impacts of the programme on wages and maize prices.

However, a significant finding of model simulations is that beneficial indirect effects may be greater than direct impacts in maize growing areas with high rates of poverty incidence and high land pressure. These indirect effects arise through increases in the ratio of wages to maize prices, and benefit poorer households (who sell ganyu labour and buy maize) while potentially harming in the short term the incomes of less poor buyers of ganyu labour and sellers of maize (these households should however gain in the medium and long run from increased livelihood opportunities with wider economic growth). This finding has important implications for programme design, implementation and evaluation. Much more emphasis should be placed on ensuring that the programme and other policies are managed to maximise these indirect benefits, and on assessing these benefits in programme evaluation. There are particular implications for the design and management of area and household targeting and graduation.


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