The Effects Of Input Subsidies On Maize Productivity In Malawi

Abstract

The role of subsidies as an effective tool to get agriculture moving in developing nations after years of stagnation or decline have recently and widely been voiced. As a result, several countries in Africa have implemented input subsidies against stylized fact of the developmental paradox. In recognition of the contribution of maize to food security to Malawi, this study has examines the effects of input subsidies on maize productivity. Using a panel dataset for the 2002 to 2009 period from various agricultural organizations, this study applied fixed effects model to Cobb-Douglas production function to identify drivers of maize productivity and feasible generalized least squares model to assess factors of maize total factor productivity. Key finding emerging from this study is that maize sub-sector output increased since introduction of the subsidies in 2005. Before that, output had declined steadily and food insecurity was high. Growth in the sub-sector is largely due to growth in the factor inputs but also the residual. For the whole period under review, output grew at an average rate of eight percent. Of this growth, over 95 percent is due to factors of production. Though all factors namely: land, labour, capital, fertilizer, improved seed and manure were statistically significant in influencing maize output variation, in terms of individual input, the most important source of growth of the sub-sector is land seconded by labour. The study has also revealed a positive association between maize total factor productivity with the input subsidy policy, irrigation and schooling. All these results tend to suggest that the subsidy policy regime has resuscitated and reinvigorated growth in the sub-sector. Implication of these findings suggests that subsidization is justified, however, Government should encourage research that has to focus on varieties and farming systems that improve land and labour productivities, that is, land-intensive farming systems that require labour-intensive technologies.