Is wealth found in the soil or in the brain? Investing in farm people in Malawi

• Published date: 01 February 2023
• Author: Maxwell Mkondiwa
• Date: 01 February 2023
• DOI: http://doi.org/10.1111/rode.12946

REGULAR ARTICLE

Is wealth found in the soil or in the brain?

Investing in farm people in Malawi

Maxwell Mkondiwa

1,2

1

The International Maize and Wheat

Improvement Center (CIMMYT), Delhi,

India

2

Center for Agricultural Research and

Development, Lilongwe University of

Agriculture and Natural Resources

(LUANAR), Lilongwe, Malawi

Correspondence

Maxwell Mkondiwa, The International

Maize and Wheat Improvement Center

(CIMMYT), Delhi, India;

Center for Agricultural Research and

Development, Lilongwe University of

Agriculture and Natural Resources

(LUANAR), Lilongwe, Malawi.

Email: mkond001@umn.edu

Abstract

Should a typical developing country invest more in agri-

culture or education? At what stage of development is it

optimal to invest more in each of these sectors? These are

important questions that governments of developing

countries grapple with when designing investment plans.

In this paper, I propose a soil–human capital conceptual

framework of development and use it to explain estimates

of agricultural returns to schooling in Malawi. I use panel

survey data for Malawi and rely on the exogenous educa-

tion policy changes and spatial variation in access to

schooling to identify effects of schooling on agricultural

incomes. In addition, I correct for selection into income

activities within a panel data and instrumental variables

estimation framework. I find annual agricultural returns

to schooling in Malawi of 3%–4% after correcting for

selection and unobserved heterogeneity and 7% in the

uncorrected specifications. I also find consistently higher

returns to schooling in the nonagricultural sector for

those not living in the village of birth and higher returns

in the agricultural sector for those living in the village of

birth. Given the size of the farm sector, wealth in Malawi

is still in the soil, but that future growth in wealth

depends on human capital investments.

KEYWORDS

Africa, human capital, Malawi, selection bias

JEL CLASSIFICATION

O12, O15

Received: 15 April 2020 Revised: 30 July 2022 Accepted: 11 September 2022

DOI: 10.1111/rode.12946

134 © 2022 John Wiley & Sons Ltd. Rev Dev Econ. 2023;27:134–157.wileyonlinelibrary.com/journal/rode

“In sum and substance, the man who is bound by traditional agriculture cannot pro-

duce much food no matter how rich the land.Thrift and work are not enough to

overcome the niggardliness of this type of agriculture. To produce an abundance of

farm products requires that the farmer has access to and has the skill and knowl-

edge to use what science knows about soils, plants, animals, and machines.”

Schultz (1964, p. 205)

“Chuma chili mthaka (Wealth is found in the soil)”—Malawian proverb

1|INTRODUCTION

Given the continuing dominance of the agricultural sector in providing employment in the poor

countries in sub-Saharan Africa (SSA), what patterns of investment will be most effective at

increasing incomes of those working in agriculture? Is their wealth

1

found in the soil or brain?

This question is elusive to households in developing countries and—arguably in equal or worse

measure—to economists and other social scientists. Before the 1960s, the leading economists—

Adam Smith, David Ricardo, and Thomas Robert Malthus—had postulated that only physical

capital investments in natural resources (e.g., land and soil) account for the differences between

the haves and have-nots. This was a natural earth view. A later position starting with Theodore

Schultz and Gary Becker was that land is overrated and argued that income differences are

mostly due to human capital differences. For instance, Schultz argues in his 1979 Nobel Laure-

ate Lecture (Schultz, 1980) that “differences in the productivity of soils are not a useful variable

to explain why people are poor in long-settled parts of the world.”His argument and that of

Becker (1994) was that education is of little use in traditional agriculture because farming

methods and knowledge are then readily passed from parents to children, while in an agricul-

tural sector where technical change is happening, educated farmers are better able to deal with

disequilibria by seeking more information and reallocating inputs efficiently.

A mix of the soil and human capital positions appears to date. The effects of holding one

side or the other are not only of academic interest; huge amounts of financial resources globally

are allocated based on these positions. For example, the World Bank Group pushed for struc-

tural adjustment programs across the developing world in the 1980s–1990s in large part by

shifting the focus from agricultural subsidies—mostly fertilizer support programs that reflect

investments in the soil—in the postcolonial governments to education. Recently, investments

in the soil are back on the agenda across SSA, while rural education programs have remained

stagnant. This culminated in the 2008 World Development Report, the World Bank's flagship

report, focusing on agriculture as the driver to development (World Bank, 2008). There is, how-

ever, a renewed interest in the international community toward education evidenced by the

2018 World Development Report that focuses on learning as a means to realize education's

promise (World Bank, 2018). The evidence for such policy moves on welfare in developing

countries is limited and difficult to study. For a start, one must assign treatment over many

decades to determine which is beneficial in the short-, medium-, and long run. Such a random-

ized experiment is unlikely, and the best approach is using quasi-experimental approaches as I

attempt in this paper.

The main aims of this paper are twofold. First, I propose a conceptual framework for linking

soil and human capital during development transitions that explain the observed aspects of

development in developing countries and using Malawi as a prototype case of continent-wide

trends in investments. The premise for this conceptual framework is that as a matter of natural

MKONDIWA 135