REPUBLIC OF MALAWI Poverty Assessment Poverty and Equity Global Practice Africa Region REPUBLIC OF MALAWI Poverty Assessment Poverty and Equity Global Practice Africa Region June, 2016 TABLE OF CONTENTS Acknowledgements ...................................................................................................................................... xv Abbreviations .............................................................................................................................................xvii CHAPTER 1: Poverty and Shared Prosperity in Malawi, 2004–2010 ..........................................................1 1.1. Snapshot of Poverty in Malawi ..................................................................................................................1 1.2. Where Are the Poor and Who Are They? ..................................................................................................5 1.2.1. Incidence of poverty and inequality across space ..........................................................................................5 1.2.2. Who are the poor? ...................................................................................................................................8 1.3. Shared Prosperity ..................................................................................................................................... 10 1.3.1. Incidence of growth of consumption and monetary poverty ......................................................................... 10 1.3.2. High and persistent income inequality.....................................................................................................13 1.3.3. Decomposing changes into growth and redistribution ................................................................................14 CHAPTER 2: Poverty Dynamics in Malawi from 2010 to 2013 .................................................................17 2.1. The Integrated Household Panel Survey of Malawi ...............................................................................18 2.2. Stylized Facts about Poverty and Poverty Dynamics in Malawi During 2010–2013 ............................20 2.2.1. Poverty in non-lean months in 2010 and 2013 ........................................................................................20 2.2.2. Chronic poverty ....................................................................................................................................22 2.2.3. Transient poverty ..................................................................................................................................24 2.3. Correlates of Poverty Dynamics in Malawi .............................................................................................26 2.3.1. Profiling chronic and transient poverty ....................................................................................................26 2.3.2. Correlates of chronic poverty...................................................................................................................30 2.3.3. Evolution of dynamic poverty correlates and other endowments .................................................................. 31 CHAPTER 3: Multidimensional Poverty in Malawi, 2004–2010 and 2010–2013 ....................................33 3.1. Multidimensional Poverty from 2004 to 2010 and from 2010 to 2013 ................................................34 3.1.1. Defining multidimensional poverty .........................................................................................................34 3.1.2. Trends of multidimensional poverty .........................................................................................................35 3.2. Trends in Nonmonetary Deprivations ....................................................................................................37 3.3 Inequalities in Access to Assets and Services and Opportunities ...........................................................43 3.3.1 Inequalities in access to assets and services .................................................................................................43 iv REPUBLIC OF MALAWI – POVERTY ASSESSMENT 3.3.2. Inequality of opportunities .....................................................................................................................49 3.4. What Could Explain the Improvements in Education and Health? ..................................................... 51 3.4.1. Access to education ................................................................................................................................ 51 3.4.2. Access to health .....................................................................................................................................53 CHAPTER 4: Food Security and Nutrition in Malawi: Mapping Progress since 2004 .............................57 4.1. Caloric Intake ...........................................................................................................................................58 4.2. Undernourishment ..................................................................................................................................60 4.2.1. Dynamics of undernourishment ..............................................................................................................62 4.3. Dietary Diversity .......................................................................................................................................64 4.3.1. Determinants of dietary diversity ............................................................................................................66 4.4. Malnutrition .............................................................................................................................................67 4.4.1. Improving child nutrition ......................................................................................................................70 4.5. Subjective Food Security .......................................................................................................................... 71 4.5.1. Subjective food insecurity and food prices .................................................................................................73 CHAPTER 5: Drivers of Poverty Changes in Malawi, 2004–2010 and 2010–2013 ..................................77 5.1. Stylized Facts about Poverty Trends and Poverty Dynamics in Malawi, 2004–2013 ...........................79 5.2. A Framework to Understand What Drives Changes in Poverty .............................................................80 5.3. Sources and Structure of Household Income ......................................................................................... 81 5.3.1. From what sources do households derive their incomes? ..............................................................................82 5.3.2. Structure of household income: Shares of income by source .........................................................................85 5.4. Contribution of Income Sources to Poverty Changes: The Shapley Decomposition Approach ..................................................................................................86 5.4.1. What is the relationship between income generation and household welfare? ................................................87 5.4.2. Contributions of income components to poverty changes in 2004–2010 ......................................................92 5.4.3. Contributions of income components to poverty changes in 2010–2013 ......................................................93 5.5. Drivers of Main Income Sources Leading to Poverty Changes ..............................................................95 CHAPTER 6: Agricultural Productivity and Poverty in Malawi ...............................................................109 6.1. State of Agriculture in Malawi ................................................................................................................111 6.2. Ownership of Agricultural Assets (Equipment and Land), Ownership of Livestock, Access to Services, and Incidence of Input Utilization ������������������������������������������������������������������������� 11 6 6.2.1. Ownership of agricultural equipment and land ...................................................................................... 11 7 6.2.2. Access to services: Extension, credit, and subsidized inputs .......................................................................120 6.3. Empirical Analysis of the Determinants of Agricultural Productivity .................................................125 6.4. Poverty and Agricultural Productivity ...................................................................................................126 6.4.1. Poverty incidence and dynamics............................................................................................................126 6.4.2. Empirical analysis of the effect of agricultural productivity on the welfare of households ...............................127 CHAPTER 7: Non-Farm Activities and Poverty in Malawi ..................................................................... 133 7.1. Non-Farm Employment in Household Livelihoods ............................................................................135 7.1.1. Prevalence of non-farm activities in Malawi ..........................................................................................135 7.1.2. Nature of non-farm activities