TY - JOUR

T1 - Large-scale agro-industrial investments and rural poverty

T2 - Evidence from sugarcane in Malawi

AU - Herrmann, Raoul

AU - Grote, Ulrike

PY - 2015/11

Y1 - 2015/11

N2 - This article investigates the potential household welfare implications of large-scale agro-industry investments in Sub-Saharan Africa. Specifically, it compares the income and poverty of households integrated into a Malawian sugar investment with those households not integrated. Two different supply-chain set-ups are studied: smallholder outgrower and vertically integrated estate-production systems. Potential selection bias is addressed using propensity score matching and a number of robustness checks. We find significant positive income differences between participants in either supply-chain set-up and the respective counterfactual. Overall, income poverty is significantly lower among outgrowers relative to the counterfactual, whereas in the case of estate workers these differences are only significant for the extreme poverty line. Qualitative interviews confirm these results, but they also allude to risks for the rural poor associated with social conflicts in the expansion of new outgrower schemes as well as a lack of transparency in the operation of existing schemes, which are likely to undermine the poverty-reducing potentials of such investments.

AB - This article investigates the potential household welfare implications of large-scale agro-industry investments in Sub-Saharan Africa. Specifically, it compares the income and poverty of households integrated into a Malawian sugar investment with those households not integrated. Two different supply-chain set-ups are studied: smallholder outgrower and vertically integrated estate-production systems. Potential selection bias is addressed using propensity score matching and a number of robustness checks. We find significant positive income differences between participants in either supply-chain set-up and the respective counterfactual. Overall, income poverty is significantly lower among outgrowers relative to the counterfactual, whereas in the case of estate workers these differences are only significant for the extreme poverty line. Qualitative interviews confirm these results, but they also allude to risks for the rural poor associated with social conflicts in the expansion of new outgrower schemes as well as a lack of transparency in the operation of existing schemes, which are likely to undermine the poverty-reducing potentials of such investments.

KW - Agro-industrial investments

KW - Estate employment

KW - Malawi

KW - Outgrowers

KW - Sugarcane

UR - http://www.scopus.com/inward/record.url?scp=84949568587&partnerID=8YFLogxK

U2 - 10.1093/jae/ejv015

DO - 10.1093/jae/ejv015

M3 - Article

AN - SCOPUS:84949568587

VL - 24

SP - 645

EP - 676

JO - Journal of African economies

JF - Journal of African economies

SN - 0963-8024

IS - 5

ER -