Adverse nutrition effects of taxing export crops in Malawi

The models suggest that if Malawi had followed the principles of export parity pricing, smallholders would have shifted their land use away from maize toward export crops, particularly tobacco. This would have led to a substantial increase in the output of tobacco and a small decrease in maize production. The effects of such a policy change would have filtered through the economy, to raise overall GDP and redistribute the value added toward small farmers and away from other functional income groups. These higher incomes would substantially benefit child nutrition. The concern that there may be deleterious consequences for nutrition when a greater share of income comes from the sale of export crops instead of from subsistence maize production is shown to be unwarranted. This is important because it reinforces the central message: policymakers must eliminate distortions in markets in order to raise extremely low incomes and reduce the high level of malnutrition in Malawi. The policy of taxing smallholders, which remains despite a decade of structural adjustment, needs to be quickly addressed. (Author abstract, modified)