ORIGINAL PAPER Welfare impacts of smallholder farmers’ participation in maize and pigeonpea markets in Tanzania Frank E. Mmbando 1,2 & Edilegnaw Z. Wale 1 & Lloyd J. S. Baiyegunhi 1 Received: 23 April 2014 /Accepted: 6 October 2015 /Published online: 3 November 2015 # Springer Science+Business Media Dordrecht and International Society for Plant Pathology 2015 Abstract This paper evaluates the impact of maize and pigeonpea market participation and the level of participation on household welfare measured by consumption expenditure in rural Tanzania. The study used cross-sectional farm house- hold level data collected in 2010 from 700 randomly selected households in northern and eastern zones of Tanzania. Propensity score matching and endogenous switching regres- sion techniques were employed to address the welfare impacts of market participation for binary treatment, while linear re- gression was employed to address the welfare impacts of the level of market participation. Maize and pigeonpea market participation and the level of participation had positive and significant impacts on the welfare of rural households. On average, maize and pigeonpea market participation increased consumption expenditure per capita in the range of 19.2– 20.4 % and 28.3–29.4 %, respectively. Similarly, a one unit increase in the predicted level of market participation in- creased per capita consumption expenditure by 0.5 and 0.3 %, for both maize and pigeonpea, respectively. This con- firms the potential role of market participation and the level of participation in improving rural household welfare, as higher consumption expenditures from market participation also mean improved food security and reduced poverty. Policies aimed at reducing the transaction costs of accessing markets such as improved market information, rural infrastructure and household capacity to produce surplus production are critical to the improvement of household welfare. Keywords Market participation . Rural household welfare . Propensity score matching . Endogenous switching . Tanzania Introduction The issue of welfare gains to small-scale farmers from partic- ipation in markets, specifically in sub-Saharan Africa (SSA) has acquired much significance in recent times (Barrett 2008; Bellemare and Barrett 2006; Barrett et al. 2012). Should par- ticipation in markets lead to welfare gains, it offers credible opportunities for small-scale farmers in these countries to transform their livelihoods. In SSA, where 70 % of the popu- lation relies on agriculture for their livelihoods, and 80 % of all the farms are less than 2 ha in size, poor smallholder farmers can turn their surpluses into income only if they have the ability to access markets (WDR 2008). It is widely acknowl- edged that the involvement of small-scale farmers in markets can contribute to higher productivity and income growth, which in turn can enhance food security, poverty reduction efforts, and overall economic growth (Barrett 2008; Bernard and Spielman 2009). Rural agricultural households in SSA are thus a logical focus for food security and poverty alleviation policies. These policies commonly regard boosting agricultur- al productivity and increasing rates of market participation as key instruments for improving the living standards of agricul- tural households (Rios et al. 2009). In SSA, there is a high potential for smallholders to derive livelihoods from market-oriented agriculture (Barrett 2008). Increasing participation in agricultural markets is a key factor to lifting rural households out of poverty in African countries * Frank E. Mmbando fmmbando@gmail.com 1 Discipline of Agricultural Economics, School of Agricultural, Earth and Environmental Sciences, University of KwaZulu-Natal, Private Bag X01, Scottsville, 3209 Pietermaritzburg, South Africa 2 Selian Agricultural Research Institute (SARI), P.O. Box 6024, Arusha, Tanzania Food Sec. (2015) 7:1211–1224 DOI 10.1007/s12571-015-0519-9