Local Economy Impacts and Cost-Benefit Analysis of Social Protection and Agricultural Interventions in Malawi

Using rural economy-wide impact simulation methods and cost-benefit analysis, this study examines the impacts of individual and combined social protection and agricultural interventions in Malawi on incomes, poverty and production. The goal of this analysis is to provide evidence on policy options to increase coordination and coherence between social protection and agricultural programmes, with the objective of reducing poverty, increasing incomes and enhancing agricultural production and productivity.

Impacts of interventions on targeted households can be estimated using experimental or quasi-experimental methods, but there are little rigorous evaluations available on the impacts of Malawi’s social protection and agricultural interventions. Therefore, to estimate the impacts of a range of policy options for standalone and combined interventions, the study uses micro-data from household surveys to model the production of targeted and nontargeted households in rural Malawi, as well as their impacts on poverty and inequality.

Research shows that significant income gains in rural areas can extend beyond the direct beneficiary households, as a result of consumption and other local linkages. Given the income gained by these vulnerable households, and its multiplier effects in local economies, the result could be substantial benefits for ineligible households living in the local economy. It is quite possible that the impacts of these programmes on communities as a whole are larger than the direct impact originating from interventions directly targeted to the beneficiaries themselves. The analytical approach taken in this paper makes it possible to quantify the impacts of a range of social protection and agricultural interventions on households living in Malawi’s rural economy, which are usually missed by other types of (programme) evaluations. These economy-wide impacts are then used to undertake an economy-wide cost-benefit analysis of individual or combined interventions.