Local Economy Impacts and Cost-Benefit Analysis of Social Protection and Agricultural Interventions in Malawi Local Economy Impacts and Cost-Benefit Analysis of Social Protection and Agricultural Interventions in Malawi Justin Kagin, Kagin’s Consulting J. Edward Taylor, University of California, Davis Luca Pellerano, ILO Silvio Daidone, FAO Florian Juergens, ILO Noemi Pace, FAO Marco Knowles, FAO Published by the Food and Agriculture Organization of the United Nations and International Labour Organization and United Nations Children's Fund Rome, 2019 The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations (FAO), International Labour Organization (ILO) or United Nations Children’s Fund (UNICEF) concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. 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All requests for translation and adaptation rights, and for resale and other commercial use rights should be made via www.fao.org/contact-us/licence-request or addressed to [email protected]. FAO information products are available on the FAO website (www.fao.org/publications) and can be purchased through [email protected] Information on ILO publications and digital products can be found at: www.ilo.org/publns Information on UNICEF publications and digital products can be found at: https://www.unicef.org/publications/ Cover photo: ©Benedicte Kurzen Noor for FAO Contents Acknowledgments .................................................................................................................... v Abbreviations .......................................................................................................................... vi Executive summary ................................................................................................................ vii 1. Introduction ...................................................................................................................... 1 2. Methodologies ....................................................................................................................... 3 2.1. Impacts of programmes on beneficiary households ................................................................ 3 2.2. Local Economy-wide Impact Evaluation (LEWIE) ..................................................................... 4 2.3. Cost-Benefit Analysis ............................................................................................................. 7 3. Data ................................................................................................................................... 8 4. Programmes considered .................................................................................................. 9 4.1. The Social Cash Transfer ........................................................................................................ 9 4.2. Public works programmes ...................................................................................................... 9 4.3. The Farm Input Subsidy Programme....................................................................................... 9 4.4. Extension services ............................................................................................................... 10 4.5. Irrigation projects ................................................................................................................ 10 5. Household groups........................................................................................................... 11 6. Construction of the LEWIE model .............................................................................. 13 6.1. Modelling household production ......................................................................................... 13 6.2. Modelling household consumption ...................................................................................... 17 7. Policy options and simulation results ........................................................................... 18 7.1. Social protection interventions ............................................................................................ 18 7.2. Agricultural interventions .................................................................................................... 30 7.3. Combined social protection and agricultural interventions ................................................... 42 8. Local economy-wide cost-benefit analysis ................................................................... 49 8.1. Cost-benefit ratios of the SCT ............................................................................................... 50 8.2. Cost-benefit ratios of PWPs ................................................................................................. 51 8.3. Cost-benefit ratios of the FISP .............................................................................................. 52 8.4. Cost-benefit ratios of extension services and irrigation ......................................................... 54 8.5. Cost-benefit ratios of combining the SCT and FISP ................................................................ 55 9. Conclusion ...................................................................................................................... 57 References ............................................................................................................................... 60 Appendix A: Impacts on poverty and inequality of policy options ................................... 62 iii Appendix B: Detailed tables .................................................................................................. 66 Appendix C: LEWIE methodology ...................................................................................... 78 iv Acknowledgments The authors would like to acknowledge the invaluable contributions made to this report by members of the Government of Malawi, including Lukes Kalilombe (MoFEPD), Readwell Msopole, Osborne Tsoka (MoAIWD), Charles Chabuka, Brighton Ndambo (MoGCDSW) and Charity Kaunda (LDF). We would like to remember Harry Mwamlima, from the Ministry of Finance, passed away in early 2019, who provided critical insights and suggestions during the various stages of the analysis and the drafting of the report. The authors would further like to thank those from FAO and UNICEF who helped to review and strengthen this report, including Edward Archibald, Bob Muchabaiwa (UNICEF), Florence Rolle, Doreen Kumwenda, Ervin Prifti and Fabio Veras (FAO). v Abbreviations ASWAp Agriculture Sector Wide Approach CBA Cost Benefit Analysis DOI Department of Irrigation FAO United Nations Food and Agriculture Organization FISP Farm Input Subsidy Programme GoM Government of Malawi IFAD International Fund for Agricultural Development IHS Integrated Household Survey ILO International Labour Organization IRLAD Irrigation, Rural Livelihoods and Agricultural Development Project LDF Local Development Fund LEWIE Local Economy Wide Impact Evaluation MASAF Malawi Social Action Fund MGDS Malawi Growth and Development Strategy MK Malawi Kwacha MNSSP Malawi National Social Support Programme MoAIWD Ministry of Agriculture, Irrigation and Water Development MoFEPD Ministry of Finance, Economic Planning and Development MoGCDSW Ministry of Gender, Children, Disability and Social Welfare MoLGRD Ministry of Local Government and Rural Development NAIP National Agricultural Investment Plan NPV Net Present Value NSO National Statistical Office NSSP National Social Support Programme PV Present Value PWP Public Works Programmes RCT Randomized Controlled Trials SCT Social Cash Transfer UNICEF United Nations Children’s Fund US$ United States Dollar vi Executive summary 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