Ganyu Labor in Malawi: Efficiency Problems and Determinants of Supply

Poor rural households in Malawi often chose to supplement their income through additional casual work on other farms (“ganyu” labor). Based on data from the Second Integrated Household Survey for 2004, we explore the potential objectives and determinants of ganyu supply. We find a confirmation of the neoclassical theoretical hypothesis whereby households use ganyu as a consumption smoothing option and supply ganyu in response to a higher marginal product of this particular type of labor as opposed to own farm labor. While our results therefore reject the alternative hypothesis of a backward bending labor supply curve, they reveal interesting insurance and cultural patterns of the allocation of labor across own farm and foreign farm activities in rural Malawi. Village level shocks increase the gross amount of ganyu supply across families that tend to supply labor and families that tend to demand ganyu labor. Women headed households appear to make a particularly strong use of ganyu as an insurance through social networks and for this purpose simultaneously supply and demand ganyu. And ganyu is particularly widely spread in ethno-cultural contexts with matrilineal systems, i.e. predominantly in the South and the Center of the country. However, enhanced education for individual peasants as well as for the community as a whole, encouragement of cash crop growing practices and crop diversification appear to open up some alternatives to traditional ganyu labor. JEL Codes: O12, J22, J24