Achievable food security: How market failures lead to poor economic conditions and what can be done about them

Type Thesis or Dissertation - MA thesis
Title Achievable food security: How market failures lead to poor economic conditions and what can be done about them
Publication (Day/Month/Year) 2006
Our task in this report is to document the sources of food insecurity in Malawi, to assess the underlying economic forces that relate to the insufficient resources of calories, and to propose a series of interventions that target the root of an increasingly troublesome problem within Malawi. This document serves to act as a resource for the Ministry of Agriculture and Irrigation and the Ministry of Finance and Economic Planning in each Ministry's decision making as well as the collective decision making of the Malawian Government with regard to agricultural production and rural household standards of living. By outlining the current agricultural and household nutritional data, we establish our motivation for addressing food security in Malawi. Dependent on agriculture and hampered by poor soils and erratic rains, the Malawian rural economy faces grave risks. Dealing with such risks has a direct impact on the food security of rural households. Inefficient production becomes the norm and underinvestment in the land and inputs predominates. For the most part, Malawians lack sufficient resources and institutions to manage the risks of agricultural production. In a typical year, half of rural Malawian households run out of food stocks by November or six months after the harvesting season. The ability of a household to have stocks last longer into the year is directly impacted by production shocks. Shocks to agricultural production come in two main forms: generalized and idiosyncratic. Using rainfall as a generalized shock at the district level and adult sickness in a household as an idiosyncratic shock, we show that the ability of a household to maintain food stocks is negatively related with drought (too little rain), flood (too much rain), and sickness. Additionally, we find that access to Starter Pack inputs during the 2001-2004 period was positively related with our measure of food security. The ability of a household to insure itself against shocks to production is limited. Both at the household and community level, we find that the consumption of households is impacted by output even though households would probably prefer to make sure that their consumption is not highly variable. The use of coping strategies in response to shocks and lack of insurance is greatly limited. Work through ganyu, transfers and livestock sales are all insignificantly related to the production and food stocks of a household. We propose a two-level approach to developing stronger agricultural and economic policy for Malawi. First, the Ministries should seek long-term production-enhancing projects such as irrigation and credit market development in order to support the long-run level of rural Malawians. Second, the Ministries should seek to improve the short term mechanisms through which households can manage risk. Improved inputs and crop diversification, labor supply, and state-contingent transfers can all act as market-supporting policies to fill the void of risk management failures at the household and communal levels.

Related studies