Abstract

This study uses a three-wave panel dataset from nationally representative surveys by the Central Statistical Office and Cragg's (1971) model for corner-solution problems to determine the effect of the government-sponsored maize input subsidy program on the production of groundnuts in Zambia. The results show that even though the maize subsidy programme, does not significantly affect the smallholder farmer’s decision to participate in groundnuts production, maize subsidies however do significantly influence the proportion of cultivated land area allocated to groundnuts production. This finding confirms that the current high subsidy levels targeted at maize are causing farmers to relocate their productive resources, particularly land, from other cropping enterprises towards maize production. The results also show that land allocation to groundnuts is also influenced by the household's labour endowment, level of activity of the Food Reserve Agency (FRA) in the district, the household's access to market information, and the price of groundnuts relative to prices of other related commodities like maize, mixed beans, cowpeas and soyabeans.

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