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Application of Chow test to improve analysis of farmer participation in markets in Kenya

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  • Otieno, David Jakinda
  • Omiti, John M.
  • Nyanamba, Timothy O.
  • McCullough, Ellen
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    Abstract

    Involvement of farmers especially those at the smallholder level, in commercial agriculture is an important pathway towards economic development. There is a growing literature on the extent and determinants of market participation by farmers in different areas of the world. However, many studies fail to statistically account for the choice of either pooled models or disaggregated analysis of data from multiple sites. The consequence is that the scope and relevance of policy inferences on the basis of those results are limited. This study contributes to knowledge in filling the analytical void through application of the Chow test. Primary data from seventy seven vegetable farmers is analysed to understand factors that influence the level of market participation in rural and peri-urban areas of Kenya. Results show that more output is sold by peri-urban farmers and unit price of output is also higher in those areas, while in the rural villages long distances from farms to points of sale are a major impediment to the intensity of market orientation. Moreover, the findings show the effects of three other important factors (non-farm income, household size and levels of education), which would otherwise have been ignored had an aggregation of data been made without statistical evidence. The main message from these results is that the analytical toolkit of agricultural economists should be improved in order to generate targeted policy interventions for different socio-economic environments. The desire for this is urgent, considering the need to enhance food supply and ensure better farm incomes in a changing agricultural landscape whereby emerging challenges; particularly climatic and economic shocks may exert unfavourable impacts on input and output markets, if appropriate strategies are not implemented.

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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 50776.

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    Date of creation: 2009
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    Handle: RePEc:ags:iaae09:50776

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    Keywords: Chow test; rural-urban divide; market analysis; policy; Kenya; Agribusiness; Agricultural and Food Policy; Marketing; Research Methods/ Statistical Methods;

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    1. Diebold, Francis X. & Chen, Celia, 1996. "Testing structural stability with endogenous breakpoint A size comparison of analytic and bootstrap procedures," Journal of Econometrics, Elsevier, vol. 70(1), pages 221-241, January.
    2. Julia Campos & Neil R. Ericsson & David F. Hendry, 1993. "Cointegration tests in the presence of structural breaks," International Finance Discussion Papers 440, Board of Governors of the Federal Reserve System (U.S.).
    3. Alemayehu Geda & Niek de Jong & Mwangi S. Kimenyi & Germano Mwabu, 2005. "Determinants of Poverty in Kenya: A Household Level Analysis," Working papers 2005-44, University of Connecticut, Department of Economics.
    4. Alene, Arega D. & Manyong, V.M. & Omanya, G. & Mignouna, H.D. & Bokanga, M. & Odhiambo, G., 2008. "Smallholder market participation under transactions costs: Maize supply and fertilizer demand in Kenya," Food Policy, Elsevier, vol. 33(4), pages 318-328, August.
    5. Minot, Nicholas & Ngigi, Margaret, 2004. "Are horticultural exports a replicable success story?," MTID discussion papers 73, International Food Policy Research Institute (IFPRI).
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