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Supermarkets, farm household income and poverty: Insights from Kenya

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  • Rao, Elizaphan J.O.
  • Qaim, Matin
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    Abstract

    Expansion of supermarkets in developing countries is increasingly providing opportunities for farmers to participate in modern supply chains. While some farmers are excluded by stringent supermarket requirements, there are important gains for participating farmers. However, studies analyzing income effects of high-value chains use approaches that either show no causality or ignore structural differences between farmers in different channels. Using endogenous switching regression and data from a survey of vegetable growers in Kenya, we account for systematic differences and show that participation in supermarket chains yields 50% gain in household income leading to 33% reduction in poverty. Supermarket expansion is therefore likely to have substantial welfare effects if more farmers are supported to overcome inherent entry barriers.

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    Bibliographic Info

    Paper provided by African Association of Agricultural Economists (AAAE) & Agricultural Economics Association of South Africa (AEASA) in its series 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa with number 95771.

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    Date of creation: Jan 2010
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    Handle: RePEc:ags:aaae10:95771

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    Postal: c/o FORMAT, 5th Floor, Muthaiga Mini Market, Limuru Road, P.O. Box 79 - 00621 Village Market, Nairobi, Kenya
    Phone: 254 20 6752866
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    Web page: http://www.aaae-africa.org
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    Web page: http://www.aeasa.org.za/
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    Related research

    Keywords: supermarkets; per capita income; sample selection; endogenous switching regression; Kenya; Africa; Agribusiness; Food Security and Poverty;

    References

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    1. Miyata, Sachiko & Minot, Nicholas & Hu, Dinghuan, 2009. "Impact of Contract Farming on Income: Linking Small Farmers, Packers, and Supermarkets in China," World Development, Elsevier, vol. 37(11), pages 1781-1790, November.
    2. Neven, David & Reardon, Thomas & Chege, Jonathan & Wang, Honglin, 2005. "Supermarkets And Consumers In Africa: The Case Of Nairobi, Kenya," Staff Papers 11584, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    3. Neven, David & Odera, Michael Makokha & Reardon, Thomas & Wang, Honglin, 2009. "Kenyan Supermarkets, Emerging Middle-Class Horticultural Farmers, and Employment Impacts on the Rural Poor," World Development, Elsevier, vol. 37(11), pages 1802-1811, November.
    4. Dave D. Weatherspoon & Thomas Reardon, 2003. "The Rise of Supermarkets in Africa: Implications for Agrifood Systems and the Rural Poor," Development Policy Review, Overseas Development Institute, vol. 21, pages 333-355, 05.
    5. David Neven & Thomas Reardon, 2004. "The Rise of Kenyan Supermarkets and the Evolution of their Horticulture Product Procurement Systems," Development Policy Review, Overseas Development Institute, vol. 22(6), pages 669-699, November.
    6. Bolwig, Simon & Gibbon, Peter & Jones, Sam, 2009. "The Economics of Smallholder Organic Contract Farming in Tropical Africa," World Development, Elsevier, vol. 37(6), pages 1094-1104, June.
    7. Meike Wollni & Manfred Zeller, 2007. "Do farmers benefit from participating in specialty markets and cooperatives? The case of coffee marketing in Costa Rica-super-1," Agricultural Economics, International Association of Agricultural Economists, vol. 37(2-3), pages 243-248, 09.
    8. Reardon, Thomas & Barrett, Christopher B. & Berdegué, Julio A. & Swinnen, Johan F.M., 2009. "Agrifood Industry Transformation and Small Farmers in Developing Countries," World Development, Elsevier, vol. 37(11), pages 1717-1727, November.
    9. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October.
    10. Minten, Bart & Randrianarison, Lalaina & Swinnen, Johan F.M., 2009. "Global Retail Chains and Poor Farmers: Evidence from Madagascar," World Development, Elsevier, vol. 37(11), pages 1728-1741, November.
    11. Thomas Reardon & C. Peter Timmer & Christopher B. Barrett & Julio Berdegué, 2003. "The Rise of Supermarkets in Africa, Asia, and Latin America," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1140-1146.
    12. Michael Lokshin & Zurab Sajaia, 2004. "Maximum likelihood estimation of endogenous switching regression models," Stata Journal, StataCorp LP, vol. 4(3), pages 282-289, September.
    13. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
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    Cited by:
    1. Nassul S. Kabunga & Thomas Dubois & Matin Qaim, 2011. "Yield Effects of Tissue Culture Bananas in Kenya: Accounting for Selection Bias and the Role of Complementary Inputs," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 82, Courant Research Centre PEG.
    2. Kabunga, Nassul S. & Dubois, Thomas & Qaim, Matin, 2011. "Yield Effects of Tissue Culture Bananas in Kenya: Accounting for Selection Bias and the Role of Complementary Inputs," Proceedings of the German Development Economics Conference, Berlin 2011 43, Verein für Socialpolitik, Research Committee Development Economics.

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