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Abstract
Using data from the Malawi Financial Markets and Household Food Security Survey, this paper examines the effect of access
to credit from formal sources, and tobacco plot size, on cost inefficiency among Malawian smallholder tobacco cultivators.
Farm-specific cost inefficiency is estimated within the framework of stochastic frontier analysis. Access to credit is measured
as the sum of household members' self-reported credit limits at credit organisations, arguably a truer measure of an exogenous
credit constraint than credit program participation or actual loan uptake. It is found that tobacco cultivation is significantly
less cost inefficient per acre on larger plots. While access to credit by itself has no statistically discernible effect on cost
inefficiency, it reduces the gain in cost efficiency from a larger plot size.
© 2003 Elsevier Science B.V. All rights reserved.