Does education enhance productivity in smallholder agriculture? Causal evidence from Malawi

Malawi is a low-income country where the majority of the poor live and work in smallholder agriculture. In settings like these, schooling is believed to be a valuable tool in lifting people out of poverty. Yet, little is known about how schooling affects agricultural productivity. The effect of education on smallholder agricultural production has been estimated before but this paper contributes to the literature by estimating, for the first time, the causal effects of education on agricultural productivity using an instrumental variable approach (IV). The introduction of free primary education (FPE) and the age of paternal orphanhood are used as IV's for education. The instruments are shown to calculate local average treatment effects for individuals who only entered school due to FPE and only left school due to paternal orphanhood. It is found that there are large differences in returns to education between the subgroups. Returns are low and insignificant when FPE is used as an IV but they are larger and there is a significant effect when age of paternal orphanhood is used. Thus, while education can have large effects on agricultural productivity, this is not so for individuals specifically targeted by large scale expansions in educational access.