Agriculture And Livelihood Diversification In Kenyan Rural Households

Abstract

Governments throughout the developing world have a keen and understandable interest in diversifying their rural economies. Yet to achieve rapid growth in incomes in rural areas and in the economy as a whole, Kenya must go through an agricultural transformation. In this transformation, individual farms shift from highly diversified, subsistence-oriented production towards more specialized production oriented towards the market or other systems of exchange. This paper develops a conceptual model that distinguishes between different types of economic diversification and links these to the process of agricultural transformation; it then uses Tegemeo’s 11 year panel (1997 to 2007) of rural smallholder households to search for evidence as to how far Kenya has moved in the agricultural transformation. Within this general research purpose, the paper additionally searches for evidence that households have responded in expected fashion to the liberalization of the maize sector that began in 1994, just prior to the first survey in this panel data set. Analysis suggests that Kenya is at an early stage of the agricultural transformation but that it may be at a key point where it shifts from increasing diversification to increasing specialization. This “change in the direction of change” has important policy implications, which the paper outlines.