Farm Productivity and Household Market Participation: Evidence from LSMS Data

We analyze the correlation between farm productivity and market participation using comparable household data from Tanzania, Vietnam and Guatemala. Each farm’s input use and output levels provide a within-sample measure of relative productivity, which we relate to that household’s level of participation in local markets using a wide range of agricultural, demographic and infrastructural variables as controls and as instruments in two-stage regressions. Results indicate that, controlling for differences in market access and the underlying determinants of market participation, households with higher productivity have greater participation in agricultural markets. In contrast, households with greater rates of market participation do not consistently demonstrate higher levels of relative productivity. This result holds only in Vietnam and Guatemala, however. In the Tanzania sample we find no significant correlation in either direction. Combining household surveys in this way offers a promising approach to testing the robustness of key hypotheses across countries and over time.