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Trade and Development When Exports Lack Diversification: A Case Study From Malawi

Author

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  • Persaud, Suresh Chand
  • Meade, Birgit Gisela Saager

Abstract

Developing countries, particularly those that depend heavily on a small number of agricultural exports, are vulnerable to domestic and international shocks. These countries often have difficulty achieving sustained economic growth. This analysis uses Malawi, a country that earns most of its foreign exchange from tobacco, as a case study of export concentration and heavy exposure to volatility. The econometric results suggest that the decline in Malawi’s gross domestic product (GDP) when tobacco exports are falling is almost three times greater than the increase in GDP when exports are rising. Model-based simulations indicate that variability in tobacco exports leads to slower economic growth because GDP falls by a relatively large amount in response to a given decrease in exports, while recovering little during an upswing in exports. Gains in tobacco yield and improvements in marketing efficiency, however, can help buffer Malawi’s GDP from variability in export revenues.

Suggested Citation

  • Persaud, Suresh Chand & Meade, Birgit Gisela Saager, 2009. "Trade and Development When Exports Lack Diversification: A Case Study From Malawi," Economic Research Report 55943, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersrr:55943
    DOI: 10.22004/ag.econ.55943
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    Cited by:

    1. Oana Iuliana Rujoiu, 2021. "Challenges Relating Sustainable Structural Transformation," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 419-425, August.
    2. Alois Mandondo & Laura German, 2015. "Customary rights and societal stakes of large-scale tobacco cultivation in Malawi," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 32(1), pages 31-46, March.

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