The Impact Of Tobacco Marketing And Pricing Policy Reforms On Income Inequality Amongst Growers In Malawi: What Lessons Can Be Learnt From The Australian Experiences?

Three key questions are addressed in this paper: (1) Have Malawi’s tobacco policy reforms led to improvements in the absolute prices that smallholders get? (2) How do the prices that smallholders receive compare with what the rich estate owners get? (3) Are there any lessons that Malawi can learn from the Australian experiences? Results from three tests, namely the empirical fluctuation process (efp) test, Poe, et al. (1994) convolutions test and Kolmogorov-Smirnov (KS) test indicate that overtime tobacco policy reforms have indeed led to some improvements in both absolute and relative prices that smallholder farmers receive. However, when compared with Victoria in 2006, Malawi’s tobacco land use is nearly 256 times more than Victoria and engages more farmers but gets far less farm gate value from tobacco. Adoption of modern farming technologies, specialization and value adding at the domestic scene can be appropriate lessons for Malawi. The closure of the Victorian tobacco industry in 2006 suggests that relying on tobacco as the only tool for Malawi’s economic growth and poverty reduction may not be sustainable in the long run. There is need to diversify to other crops such as cotton, pulses, cassava, and bananas.