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Michigan State University (2006)

An Analysis of Income Poverty Effects in Cash Cropping Economies in Rural Mozambique : Blending Econometric and Economy-Wide Models

Benfica, Rui M S

Titre : An Analysis of Income Poverty Effects in Cash Cropping Economies in Rural Mozambique : Blending Econometric and Economy-Wide Models

Auteur : Benfica, Rui M S

Université de soutenance : Michigan State University (MSU)

Grade : DOCTOR OF PHILOSOPHY (PhD) 2006

Résumé
Contract farming is a pervasive institutional arrangement in cash cropping economies in Mozambique. Empirical evidence on its nature and, especially, the extent to which policies can generate broad based income growth and poverty reduction is lacking. This study investigates the rationale for persistence, the determinants of farmer participation and performance in cotton and tobacco schemes (Essay One), and the economy-wide effects of expansion and shocks in cotton and tobacco sectors on poverty reduction in concession areas of the Zambezi valley of Mozambique (Essay Two). In the first essay, we find that in both sectors contract farming is an institutional response to widespread failure in input, credit and output markets and the absence of a functional public and market based service provision network. Two stage econometric procedures (testing for the existence of threshold effects in land holdings and educational attainment) indicate that in both areas participation in the schemes is driven by factor endowments, asset ownership and alternative income opportunities, and very little by demographic factors. Also, there are no returns to education in either sector ; this result is consistent with previous research in Mozambique but surprising in an agronomically demanding crop like tobacco. Farm level profitability in cotton is significantly lower than in tobacco. Land holdings have a significant effect on profits for both crops at the highest threshold level, but effects on total crop income and total household income are found only in tobacco growing areas, where tobacco farmers appear not be giving up profitable off-farm opportunities. In those areas, we find that results may be driven by the relatively more efficient use of hired labor ; labor supply in those areas is predominantly provided by non-growers that end up sharing the benefits of contract farming. Lower profitability in cotton areas is a result of low producer prices, high input costs, and lack of effective coordination which results in low productivity and poor quality of farm output. In the second essay, we find that poverty reduction effects of scheme expansion and shocks are sizable in both areas, more so in tobacco growing areas where economic linkages are stronger. While in tobacco areas expansion with higher export prices yields higher benefits, in cotton areas, where levels of productivity are extremely low, expansion with productivity gains has a more broad-based effect ; even when impacts are limited among growers, any expansion in cotton production results in some benefits to non-growers. The damages of increased input prices are more severe in tobacco growing areas, where the input package is substantially more expensive. The effects of an export tax are more severe in tobacco growing areas where it significantly limits the effects of otherwise successful expansion efforts. In both areas, better maize prices have very positive implications for poverty reduction. The study recommends that government not embark in restrictive trade policies (export taxes and maize export restrictions). Instead, it should promote an environment conducive for private sector investment and improved sector coordination. Increased contribution of cotton to rural livelihoods will require increased productivity through an improved input package, extension, and prices to farmers. For long term sustainability in tobacco, adverse environmental impacts deserve more attention.

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