Large-scale agro-industrial investments and rural poverty

Evidence from sugarcane in Malawi

authored by

Raoul Herrmann, Ulrike Grote

Abstract

This article investigates the potential household welfare implications of large-scale agro-industry investments in Sub-Saharan Africa. Specifically, it compares the income and poverty of households integrated into a Malawian sugar investment with those households not integrated. Two different supply-chain set-ups are studied: smallholder outgrower and vertically integrated estate-production systems. Potential selection bias is addressed using propensity score matching and a number of robustness checks. We find significant positive income differences between participants in either supply-chain set-up and the respective counterfactual. Overall, income poverty is significantly lower among outgrowers relative to the counterfactual, whereas in the case of estate workers these differences are only significant for the extreme poverty line. Qualitative interviews confirm these results, but they also allude to risks for the rural poor associated with social conflicts in the expansion of new outgrower schemes as well as a lack of transparency in the operation of existing schemes, which are likely to undermine the poverty-reducing potentials of such investments.

Organisation(s)

Institute of Environmental Economics and World Trade

External Organisation(s)

German Institute of Development and Sustainability (IDOS)

Type

Article

Journal

Journal of African economies

Volume

24

Pages

645-676

No. of pages

32

ISSN

0963-8024

Publication date

11.2015

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

Development, Economics and Econometrics

Sustainable Development Goals

SDG 1 - No Poverty

Electronic version(s)

https://doi.org/10.1093/jae/ejv015 (Access: Closed)