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Access to credit, plot size and cost inefficiency among smallholder tobacco cultivators in Malawi

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  • Hazarika, Gautam
  • Alwang, Jeffrey

Abstract

Using data from the Malawi Financial Markets and Household Food Security Survey, this paper examines the effect of access to credit from formal sources, and tobacco plot size, on cost inefficiency among Malawian smallholder tobacco cultivators. Farm-specific cost inefficiency is estimated within the framework of stochastic frontier analysis. Access to credit is measured as the sum of household members' self-reported credit limits at credit organisations, arguably a truer measure of an exogenous credit constraint than credit program participation or actual loan uptake. It is found that tobacco cultivation is significantly less cost inefficient per acre on larger plots. While access to credit by itself has no statistically discernible effect on cost inefficiency, it reduces the gain in cost efficiency from a larger plot size. © 2003 Elsevier Science B.V. All rights reserved.
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  • Hazarika, Gautam & Alwang, Jeffrey, 2003. "Access to credit, plot size and cost inefficiency among smallholder tobacco cultivators in Malawi," Agricultural Economics, Blackwell, vol. 29(1), pages 99-109, July.
  • Handle: RePEc:eee:agecon:v:29:y:2003:i:1:p:99-109
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    1. Diagne, Aliou, 1998. "Impact of access to credit on income and food security in Malawi," FCND discussion papers 46, International Food Policy Research Institute (IFPRI).
    2. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
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    4. Diagne, Aliou & Zeller, Manfred, 2001. "Access to credit and its impact on welfare in Malawi:," Research reports 116, International Food Policy Research Institute (IFPRI).
    5. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    6. Zeller, Manfred & Ahmed, Akhter U. & Babu, Suresh Chandra & Broca, Sumiter S. & Diagne, Aliou & Sharma, Manohar, 1996. "Rural finance policies for food security of the poor," FCND discussion papers 11, International Food Policy Research Institute (IFPRI).
    7. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    Cited by:

    1. O . A Adekoya, 2014. "The Patterns and Determinants of Agricultural Credit Use among Farm Households in Oyo State, Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(10), pages 1290-1297, October.
    2. Luan, D. X. & Bauer, S. & Kuhl, R., 2016. "Income Impacts of Credit on Accessed Households in Rural Vietnam: Do Various Credit Sources Perform Differently?," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 8(1), March.
    3. Adenuga, A.H. & Muhammad-Lawal, A. & Rotimi, O.A., 2013. "Economics and Technical Efficiency of Dry Season Tomato Production in Selected Areas in Kwara State, Nigeria," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 5(1), March.
    4. Obike, Kingsley Chukwuemeka & Osundu, Charles Kelechi, 2013. "The Empirical Determinants of Cassava Farmers Access to Microfinance Services in Abia State Nigeria," MPRA Paper 63326, University Library of Munich, Germany.
    5. Liu, Yanyan, 2006. "Model Selection in Stochastic Frontier Analysis: Maize Production in Kenya," 2006 Annual meeting, July 23-26, Long Beach, CA 21281, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Yanyan Liu & Robert Myers, 2009. "Model selection in stochastic frontier analysis with an application to maize production in Kenya," Journal of Productivity Analysis, Springer, vol. 31(1), pages 33-46, February.
    7. Takane, Tsutomu, 2007. "Gambling with Liberalization: Smallholder Livelihoods in Contemporary Rural Malawi," IDE Discussion Papers 117, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    8. Kevin J. A. Thomas & Christopher Inkpen, 2013. "Migration Dynamics, Entrepreneurship, and African Development: Lessons from Malawi," International Migration Review, Wiley Blackwell, vol. 47(4), pages 844-873, December.
    9. Swaminathan, Hema & Salcedo Du Bois, Rodrigo & Findeis, Jill L., 2010. "Impact of Access to Credit on Labor Allocation Patterns in Malawi," World Development, Elsevier, vol. 38(4), pages 555-566, April.
    10. Kumar, Anjani & Staal, Steven J., 0. "Is traditional milk marketing and processing viable and efficient? An empirical evidence from Assam, India," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 49.
    11. Saldias, Rodrigo & von Cramon-Taubadel, Stephan, 2012. "Access to credit and the determinants of technical inefficiency among specialized small farmers in Chile," DARE Discussion Papers 1211, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).

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