The sequencing of agricultural market reforms in Malawi

The paper analyses the welfare impacts of alternative sequencing scenarios of agricultural input and output market reforms in Malawi using a profit ma ximisation approach. After a review of the literature on the sequencing of agricultural market reforms, the agricultural sector in Malawi is described and its history of market reforms is summarised. Subsequently, a normalise d quadratic profit function, with maize and groundnuts as the main competin g outputs and fertiliser and labour as the major variable inputs, is estima ted. The simulation results using the coefficients of the estimated normali sed quadratic profit function show that, contrary to the sequencing path ad opted in the 1980s, Malawi's government should have liberalised the maize s ector first, followed by the groundnut export sector and once a supply resp onse was generated, input subsidies could have been phased out. This sequen ce would have minimised the adjustment costs of smallholder farmers and wou ld have reduced the negative impact on maize productivity and food security .