Selling Crops Early to Pay for School : A Large-Scale Natural Experiment in Malawi

In 2010, primary school in Malawi began in September, three months earlier than in 2009. Difference-in-difference specifications show that this change forced households to sell crops early, when prices are low. The effect is limited to households with school children, increases in the number of such children, and is only present for poor households. Households that sold early missed out on an expected 25% increase in prices over three months. The implication is that liquidity constraints exacerbate the negative effects of seasonal crop price cycles, which may reduce the benefits of harvest-period commitment devices by undercutting opportunities for inter-temporal arbitrage