Working Paper
Agricultural Supply Response and Poverty in Mozambique

This paper identifies the key causal factors behind farmers’ marketing decisions in Mozambique. A two-step decision making process is modelled. Farmers decide, first, whether or not to participate in the market and, second, how much to market. The model is estimated using a Heckman switching regression approach. Marginal effects are calculated for the poor and the nonpoor and broken down into a market participation component and a quantity (sales value) component. The key importance of non-price factors such as technology, transport infrastructure, farm environment and area characteristics come out clearly. The marginal effects for the poor are not substantially different from those of the nonpoor, suggesting that differences in assets and area characteristics are more important than differences in underlying behaviour. Moreover, inducing farmers previously not in the market appears more important for total sales than focusing economic policy on those already in the market. To achieve pro-poor rural growth it is therefore essential to address explicitly the conditions of high-risk, low productivity and low capital endowments of poor farmers.