The sequencing of agricultural market reforms in Malawi

The paper analyses the welfare impacts of alternative sequencingscenarios of agricultural input and output market reforms inMalawi using a profit maximisation approach. After a reviewof the literature on the sequencing of agricultural market reforms,the agricultural sector in Malawi is described and its historyof market reforms is summarised. Subsequently, a normalisedquadratic profit function, with maize and groundnuts as themain competing outputs and fertiliser and labour as the majorvariable inputs, is estimated. The simulation results usingthe coefficients of the estimated normalised quadratic profitfunction show that, contrary to the sequencing path adoptedin the 1980s, Malawi's government should have liberalised themaize sector first, followed by the groundnut export sector,and once a supply response was generated, input subsidies couldhave been phased out. This sequence would have minimised theadjustment costs of smallholder farmers and would have reducedthe negative impact on maize productivity and food security.