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Production Risks and Food Security under Alternative Technology Choices in Malawi: Application of a Multinomial Endogenous Switching Regression
Author(s) -
Kassie Menale,
Teklewold Hailemariam,
Marenya Paswel,
Jaleta Moti,
Erenstein Olaf
Publication year - 2015
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/1477-9552.12099
Subject(s) - downside risk , food security , production (economics) , diversification (marketing strategy) , economics , quantile regression , multinomial probit , econometrics , business , agriculture , microeconomics , marketing , probit model , financial economics , geography , portfolio , archaeology
Employing nationally representative data, we investigate the impact of Sustainable Intensification Practices ( SIP s) on farm households’ food security, downside risk and the cost of risk in Malawi. The analysis relies on a flexible moment‐based specification of a stochastic production function in a multinomial endogenous switching regression framework to correct for the selection bias stemming both from observed and unobserved heterogeneity. A quantile moment approach is used to estimate the cost of risk. After controlling for the effects of unobserved heterogeneity and several observable variables on maize production and downside risk functions, estimation results show that the adoption of SIP s increases food security and reduces downside risk exposure and the cost of risk. We estimate greater food security and larger reduction in downside risk from simultaneous adoption of both crop diversification (maize–legume intercropping and rotations) and minimum tillage, suggesting that there are complementary benefits from these practices. We find most of the cost of risk comes from exposure to downside risk. Our findings imply that in dealing with production risks development agents should encourage the adoption of agronomic and resource‐management practices along with other risk mitigation and food security improving strategies.