A Crossed analysis of participations in labor and grain markets: Evidence from Malawi

This study contributes to the literature on the identification of factors shaping the decision to participate in the grain market in Africa. Unlike previous studies, we introduce labor market participation into the farm household model to highlight the heterogeneity in decision making.Empirically, we rely on an extension of Heckman's approach and introduce control functions to mitigate endogeneity problems related to the adoption of agricultural technologies. Theresults include that limited access to transportation infrastructure, by discouraging the supply of grain, constrains the household to experience an excess supply of labor; the use of agricultural technologies such as inorganic fertilizers encourages the production of marketable surpluses and the employment of external agricultural labor. However, in Malawi, price incentives may have a reverse effect on the choice of market regimes, even though the effect on production may be positive for households that are already participating. This study thus provides a better targeting when designing policies aimed at increasing the integration of smallholder farmers into both product and labor markets.