Determinants of Crop Income in Rural Mozambique, 2002-2005

ACKNOWLEDGEMENTS The Directorate of Economics is undertaking collaborative research on food security with Michigan State University's Department of Agricultural, Food and Resource Economics. We wish to acknowledge the financial and substantive support of the Ministry of Agriculture (MINAG) of Mozambique and the United States Agency for International Development (USAID) in Maputo to complete food security research in Mozambique. Research support from the Bureau of Economic Growth, Agriculture and Trade of USAID/Washington also made it possible for Michigan State University researchers to contribute to this research. This report does not reflect the official views or policy positions of the Government of the Republic of Mozambique nor of USAID. The author wishes to acknowledge with gratitude the contributions of Ellen Payongayong, who provided valuable assistance during the construction of the TIA 2002-2005 panel household income dataset, as well as with other variables used in this paper, and Duncan Boughton and Cynthia Donovan, who provided comments on earlier drafts of this paper. The author also expresses his gratitude to the staff of the Department of Statistics in the Directorate of Economics (MINAG) and to the TIA survey respondents who made this analysis possible. vii EXECUTIVE SUMMARY Crop income is the predominant source of income for most rural Mozambican households, accounting for 73% of rural household income on average in 2002, and greater than 80% of the total income of the poorest 40% of rural households. While the Government of Mozambique recognizes the need to improve agricultural productivity, there is little empirical evidence to date suggesting what mix of public and private assets would best foster improved agricultural productivity in rural Mozambique. This paper aims to better understand the determinants of household crop income in rural Mozambique, by using the TIA panel household survey of 2002-2005 to measure the impact of various private and public assets on crop income. We build upon Walker et al.'s (2004) analysis of TIA02 crop income by utilizing the econometric advantages of panel econometrics to obtain improved estimates of the impact of various private and public assets on crop income. Our principal focus is to measure the effect on total household net crop income of factors which are assumed to have a positive effect on crop productivity and profitability, including: private assets such as landholding; household use of improved inputs (fertilizer, animal traction) and diversification into tobacco or cotton; and access to public goods such as extension advice, market …