Is Relaxing Equity Constraints Panacea for Malawi's Green Gold Expansion? A Fuzzy Regression Discontinuity Design Approach

This study assesses the causal effect of relaxing equity constraints on the cultivation of tobacco in Malawi.

The study uses data from the International Food Policy Research Institute in Malawi in 1994 to assess the impact of credit constraints on tobacco cultivation. The study classifies households into credit-constrained and unconstrained regimes. Findings include:

• Comparison of the average tobacco land cultivated between equity-constrained and unconstrained households show no significant differences;
• Results based on propensity score matching do not show any significant difference in land cultivated for tobacco between constrained and unconstrained households;
• Results based on fuzzy regression approach show that relaxing equity constraints increases the amount of land allocated to tobacco.

Study findings suggest that extending credit to equity-constrained households that are eligible to borrow credit for tobacco cultivation can potentially contribute to the expansion of land under tobacco cultivation in Malawi. These findings provide justification for extensive public financing of tobacco production in Malawi.