Smallholder Agricultural Commercialization and Poverty: Empirical Evidence of Panel Data from Kenya

Despite inconclusive evidence of the impact of agricultural commercialization on smallholder welfare, many developing countries with majority of their population engaged in smallholder agriculture continue to pursue this agricultural transformation process. Past empirical studies have been criticized for methodological flaws and where real negative evidence existed, then this has been attributed to policy failures rather than commercialization process per se. Using panel data collected from Kenya, this study fits an endogenous switching regression model in a correlated random effects framework to analyze impacts of agricultural commercialization on household poverty proxied by annual household per capita expenditure on food and non-food items including own produced and consumed crops and livestock products. The results show that agricultural commercialization significantly increases annual per capita household expenditure among commercialized and non-commercialized had they commercialized. The annual per capita expenditure gap existing between commercialized and non-commercialized households emanates from their differences in amounts of resources owned (57%) and efficiency of using these resources (43%). Closing this expenditure gap (poverty gap) require improving the amount of resources owned and resource use efficiency among non-commercialized households. Therefore, policy options geared toward stimulating and/or enhancing smallholder agricultural commercialization are encourages as a poverty reduction strategy.

Issue Date:
Apr 24 2017
Publication Type:
Conference Paper/ Presentation
Total Pages:
JEL Codes:

 Record created 2017-07-05, last modified 2017-08-29

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