Ganyu Labour in Malawi: Understanding Rural Household's Labour Supply Strategies

In Malawi, informal off-farm labour (ganyu) has often been described as a survival strategy which eventually drives poor rural households into even further destitution. Based on data from the Second Integrated Household Survey for 2004, we estimate the determinants of the decision to supply labour in the ganyu market and the amount of labour supplied. Our results do not support the conjecture that ganyu is necessarily a low-return strategy that confines subsistence constrained households to a vicious circle of poverty. However, we do find evidence that ganyu is used as an ex-post coping strategy in the event of shocks, and as an ex-ante social insurance mechanism. Moreover, we generally find a positive reaction of ganyu supply to an increase in the ganyu wages, and no evidence of any backward bending segment of the supply curve for households close to the subsistence level. While ganyu does not appear to drive poor households into further destitution, these households do seem to suffer the most when they face demand side constraints in times of greatest needs.