Agricultural commercialization and food security: an ex-ante approach

Purpose - The lack of theoretical and pragmatic way of measuring agricultural commercialization has been responsible for the inconsistent results for the impact of agricultural commercialization on household welfare. This study makes use of an input-based market participation approach that utilizes household preplanting production decision to stratify farming households according to production orientation. Design/methodology/approach - The study estimates a system of input and consumer demand equations. It augments traditional input and consumer demand equations with an additional variable based on an endogenous switch, which measures the probability of being a commercial farming household. Empirical evidence suggests that market orientation is an important determinant of the level of traded input and hence, market participation. Predicted probabilities obtained from the endogenous switch are used to stratify households into subsistence and commercial agricultural households. Findings - Results of the relative effect of commercial agriculture on the level of household food security support the claim that production orientation does affect the relationship between the relative share of food expenditure to the household total expenditures and the logarithm of household expenditure for this part of sub-Saharan Africa. Research limitations/implications - As in the case of all generalized method of moments studies, the results depend on the robustness of the instruments. However, search for better instruments may run afoul of Leamer'sad hocspecification search with nonexperimental data. Originality/value - This paper is original in its formulation of an endogenous switch between subsistence and commercial agriculture. This switch is estimated as a latent variable following a logit form.