Supermarkets, farm household income and poverty: Insights from Kenya

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.