Working Paper
Agricultural development, trade, and income distribution

This paper considers the impact of agriculture and international trade development on income distribution and economic activity in Mozambique. A social accounting matrix multiplier decomposition model is used—in particular, an extension of the standard model that details the process of income distribution through the economy’s institutions.

When we focus on the impact on rural low-income households, the emphasis is on the food crop and food-processing sectors. The results suggest surprisingly that such households do not benefit much from exogenous increases in agricultural crops; high-income rural and urban households benefit more.

A full decomposition of the multipliers suggests that rural low-income households link strongly to food-processing, but that the latter is not very prominent in the Mozambican economy due to high import penetration. The second focus is therefore on international trade, which reveals that the high rates of imports regarding food-processing are mainly sourced from South Africa.