This paper pulls together insights from related farm-household and CGE modelling for Malawi to suggest wider methodological and policy lessons for pro-poor policy analysis in poor agrarian economies. The farm-household and CGE models and the principal results are summarised, and their strengths and weaknesses discussed. The discussion demonstrates the potential benefits of greater integration between farm household and economy wide models, and suggests ways in which this should be achieved. A number of conclusions also emerge regarding policies promoting pro-poor economic growth. These emphasise: the importance of growth that raises real wage rates; the need for growth in smallholder agriculture where more productive labour demanding technologies exist; the complementary relationships between growth in agricultural and nonagricultural activities; the complementary relationships between growth promoting and welfare supporting policies; and the limited scope for substantial pro-poor economic growth without major structural change and longer-term tradable non-agricultural growth drivers. Policy interventions are needed to reduce transaction costs in agricultural output and input markets and to increase household liquidity: infrastructural investments, market interventions (to stimulate otherwise thin food grain and input markets) and welfare support can all play important complementary roles in this, although there are particular challenges in developing effective intervention policies. Good governance, good macroeconomic management, and access to substantial and long-term external finance are critical underlying conditions.
African development and poverty reduction: the macro-micro linkage. Forum paper 2004, 13-15 October 2004, South Africa, 25 pp.