Drivers of farm commercialization in Nigeria and Tanzania

While total factor productivity (TFP) difference between the subsistence and commercial farm types is negligible, a large number of subsistence-based farms remain outside the market economy, and national policies have emphasized the need to bring them into the fold of commercial agriculture. Improving market access may help induce greater farm commercialization and thus greater investment in agriculture. However, there is little empirical evidence on farm-level factors that stimulate agricultural commercialization in SSA. Using a nationally representative panel data from the Living Standards Measurement Study-Integrated Surveys on Agriculture, this article estimates the likelihood of being a commercial versus a subsistence farmer and the likelihood of transitioning from one farm type to another based on observable characteristics in Nigeria and Tanzania. The analysis demonstrates that although a substantial proportion of farms have no market participation in a given year, there are rich transition dynamics over time. The results from the probit regression show that resource endowments (land, labor, chemical use) and farm characteristics (multicropping system; irrigation; crop types such as fruits, vegetables, and cash crops; and animal traction use) do matter for market participation and the transitioning of subsistence farms into a market economy. These variables are positively correlated with farm commercialization and increase the likelihood of market participation. Overall, policies aimed at improving farmers' access to resources and promoting sustainable smallholder agriculture could be instrumental in raising productivity in agriculture and enhancing marketable agricultural output.