Welfare impacts of smallholder farmers' participation in multiple output markets: Empirical evidence from Tanzania.

Abstract

A relatively large body of literature has documented the welfare effects of smallholder farmers' participation in single-commodity output markets. However, limited empirical evidence is available when smallholder farmers participate in multiple-commodities output markets. We tried to fill this gap in the literature by estimating the impacts of smallholder farmers' contemporaneous participation in both maize and legume markets vis-à-vis in only maize or legume markets using household-level data from Tanzania. Applying a multinomial endogenous switching regression model that allows controlling for observed and unobserved heterogeneity associated with market participation in single-commodity and multiple-commodity markets, results showed that smallholder farmers' participation in both single-and multiple-commodity markets was positively and significantly associated with household income and food security. Moreover, the greatest benefits were obtained when farmers participated in multiple-commodity markets, suggesting the importance of policies promoting diversification in crop income sources to increase welfare and food security. Our findings also signal the complementary-rather than substitute-nature of accessing multiple-commodity markets for enhancing household livelihoods under a specialization strategy. Finally, important policy implications are suggested, from promoting and supporting public infrastructure investments to expanding road networks to reduce transportation costs, especially in remote communities, to enhance smallholder farmer access to profitable maize and legume markets in Tanzania.