The Power of Local Economy Multipliers: Synergies between Social Protection and Agricultural Interventions in Malawi

A rich literature evaluates impacts of interventions to increase agricultural productivity in developing countries, perhaps most notably input subsidy programs in sub-Saharan Africa. It largely misses the point that, in real life, diverse government ministries implement multiple productive and social programs in an effort to achieve multiple policy outcomes, and these policies interact within economies. We construct a rural economy-wide impact evaluation model to evaluate the benefits and costs of productive and social interventions in rural Malawi. The model captures direct impacts as well as income and production spillovers to non-targeted sectors and household groups. We use this model to simulate the impacts of retargeting input supports toward larger farmers while modifying social protection programs to compensate for possible negative impacts on small farms. We also compare the economic efficiency of input subsidies and other social and productive interventions.  Not surprisingly, no single policy is efficient at achieving both productive and social goals. Significant synergies among policies suggest that improving policy coherence and coordinating interventions is critical to achieving both productive and social objectives more efficiently.

This is the first study of its kind to conduct a cost-benefit analysis of alternative social protection and agriculture interventions that accounts for production and income spillover effects in the local economy. Market linkages that transmit the impacts of programmes from the directly affected households to others in the local economy are generally missed by traditional impact evaluation. Income and production spillovers can affect the overall cost-effectiveness of an intervention and also have important distributional impacts. While recent work has demonstrated the existence of positive income multipliers for cash transfer programs in rural Africa, this study provides comparable simulations of local economy multipliers for other types of interventions including public works, agriculture subsidies, irrigation and extension services, as well as their combination.

Presenter:

Justin Kagin, Kagin's Consulting

Discussants: 

Luca Pellerano, Advisor on Social Security, ILO Zambia

Noemi Pace, Economist Consultant, FAO

Moderator:

Edward Archibald, Chief of Social Policy, UNICEF Malawi