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Abstract
Three key questions are addressed in this paper: (1) Have Malawi’s tobacco policy
reforms led to improvements in the absolute prices that smallholders get? (2) How do
the 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? Results
from three tests, namely the empirical fluctuation process (efp) test, Poe, et al. (1994)
convolutions test and Kolmogorov-Smirnov (KS) test indicate that overtime tobacco
policy reforms have indeed led to some improvements in both absolute and relative
prices that smallholder farmers receive. However, when compared with Victoria in
2006, Malawi’s tobacco land use is nearly 256 times more than Victoria and engages
more farmers but gets far less farm gate value from tobacco. Adoption of modern
farming technologies, specialization and value adding at the domestic scene can be
appropriate lessons for Malawi. The closure of the Victorian tobacco industry in 2006
suggests that relying on tobacco as the only tool for Malawi’s economic growth and
poverty reduction may not be sustainable in the long run. There is need to diversify to
other crops such as cotton, pulses, cassava, and bananas.