THE IMPACT OF TOBACCO MARKETING AND PRICING POLICY REFORMS ON INCOME INEQUALITY AMONGST GROWERS IN MALAWI: WHAT LESSONS CAN BE LEARNT FROM THE AUSTRALIAN EXPERIENCES?

Three key questions are addressed in this paper: (1) Have Malawi’s tobacco policyreforms led to improvements in the absolute prices that smallholders get? (2) How dothe prices that smallholders receive compare with what the rich estate owners get? (3)Are there any lessons that Malawi can learn from the Australian experiences? Resultsfrom three tests, namely the empirical fluctuation process (efp) test, Poe, et al. (1994)convolutions test and Kolmogorov-Smirnov (KS) test indicate that overtime tobaccopolicy reforms have indeed led to some improvements in both absolute and relativeprices that smallholder farmers receive. However, when compared with Victoria in2006, Malawi’s tobacco land use is nearly 256 times more than Victoria and engagesmore farmers but gets far less farm gate value from tobacco. Adoption of modernfarming technologies, specialization and value adding at the domestic scene can beappropriate lessons for Malawi. The closure of the Victorian tobacco industry in 2006suggests that relying on tobacco as the only tool for Malawi’s economic growth andpoverty reduction may not be sustainable in the long run. There is need to diversify toother crops such as cotton, pulses, cassava, and bananas.