Market- and household-level effects of economic shocks in Malawi

This thesis has three empirical studies that are motivated by the impacts of economic shocks on food prices, household well-being, and schooling outcomes in Malawi.

The first empirical study systematically examines how transport costs are associated with spatial or regional inequalities in affordability of various foods across markets. The analysis reveals that the endogenous increase in transport costs is associated with a reduction in overall spatial inequalities in affordability of various food across markets in the short run, on average. This counterintuitive influence is driven by processed foods but not by perishable foods and nutrient-dense foods for which the changes in transport costs are associated with an increase in overall price differences across markets in the short run. Examining the relationship between transport costs and price differentials for each food item, we find that spatial inequality in food affordability widens for maize flour dehulled maize grain, maize grain (private), maize grain (ADMARC), brown beans, and eggs in the short run. Thus, an increase in transport costs lowers the incentive of traders to move these food items from a lower price market to a higher price one, sustaining spatial inequalities in prices across markets. Overall, the magnitudes of the relationships between transport costs and price differentials are smaller for market pairs that are closer to each other for all foods under consideration. In addition, we find that spatial inequality in food affordability widens for most foods under investigation, except for brown beans, usipa, utaka, and tomatoes in the long run. Therefore, there are both food security and nutritional implications of increases in transport costs, hence, the need to promote food affordability and nutrition.

The second empirical study investigates the extent to which the reform to Malawi’s fuel policy adopted in 2012 increased or decreased agricultural production and consumption differentially among households that are net-sellers, net-buyers or self-sufficient in staple maize grain. Results show that households that are in autarky in remote areas increased maize production more than those closer to the market but had lower consumption due to the increase in transport costs of accessing markets. Households that are net buyers that reside closer to the market increased maize production, consumption, and became less prone to maize insecurity, while those that reside in remote locations had lower non-food consumption and became more prone to maize insecurity relative to households that are in autarky. Conversely, households that are net sellers that reside in remote locations had lower non-food consumption and maize consumption, while those that reside closer to the market had a reduction in consumption, non-food consumption and non-maize food consumption relative to households that are in autarky. These findings have implications for other countries that are considering rescaling or removing fuel subsidies on household welfare.

The final empirical study examines the extent to which rainfall shocks differentially affect schooling outcomes in both primary and secondary education among boys and girls. The analysis shows that households allocate more resources to boys during the periods of flood shock, while resource allocation among girls is similar during the period of the rainfall shock and the normal rainfall. Turning to school attendance, the analysis reveals that the drought shock increases school attendance among younger boys and girls in lower primary school, but it reduces school attendance among older boys and girls in secondary school relative to the normal rainfall. Conversely, the flood shock increases school attendance among older boys and girls in upper primary and secondary school relative to a normal rainfall. Moving on to school progression, we find that the drought shock increases school progression among boys and younger girls in lower primary school, while the flood shock increases school progression among older boys in upper primary school and younger boys in lower secondary school, and among girls in secondary school relative to the normal rainfall. These findings have implications for education policy in other countries that are aiming at eliminating gender inequality in schooling.