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Rural investment to accelerate growth and poverty reduction in Kenya

Author

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  • Thurlow, James
  • Kiringai, Jane
  • Gautam, Madhur

Abstract

"Kenya's economy is relatively diverse, with both agricultural and industrial potential. However, the economy has performed poorly over the last decade, and poverty and inequality have risen. This paper examines the impact of alternative growth paths and rural investments on poverty using an economy-wide model. It finds that if Kenya continues along its current growth path, its economy will have to grow by more than 10 percent per year over the coming decade to meet the Millennium Development Goal (MDG) of halving poverty by 2015. Therefore, Kenya must search for alternative sources of poverty-reducing growth. The results of the model indicate that poverty is unlikely to decline significantly without an acceleration of agricultural growth. Growth in agriculture is found to benefit both urban and rural households, whereas industry-led growth benefits a smaller segment of the urban population, thus exacerbating inequality. Kenya's current Economic Recovery Strategy, however, is not optimistic about agriculture's growth potential, focusing more heavily on industry-led growth. Therefore, as Kenya prepares its new national strategy, the country should place greater emphasis on and direct resources toward accelerating agricultural growth. In assessing the impact of rural investments on growth and poverty, the paper finds that increasing agricultural spending to meet the 10 percent target set by the Maputo Declaration would lift an additional 1.5 million people above the poverty line by 2015. Specific agricultural investments have higher returns in different parts of the country, however. Irrigation favors the lowlands and the poorest segment of the population, while research and extension (R&E) favors the midlands and highlands. Investment in R&E is also found to have the highest returns in both growth and poverty reduction. However, increasing agricultural spending to 10 percent of total spending is insufficient to meet either the MDG or the 6 percent agricultural growth target of the Comprehensive African Agriculture Development Program, which Kenya has recently adopted. . Achieving this target requires nonagricultural investments, such as in roads and market development. Building rural roads and reducing agricultural transaction costs significantly reduces poverty and encourages growth beyond rural areas. While it is necessary to increase spending on agriculture, the fiscal burden of an agricultural strategy can be greatly reduced by improving investment efficiency." from Author's Abstract

Suggested Citation

  • Thurlow, James & Kiringai, Jane & Gautam, Madhur, 2007. "Rural investment to accelerate growth and poverty reduction in Kenya," IFPRI discussion papers 723, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:723
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    Citations

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    Cited by:

    1. Fofana, Ismaël & Omolo, Miriam W. O. & Goundan, Anatole & Magne Domgho, Léa Vicky & Collins, Julia & Marti, Estefania, 2019. "NAIP toolkit for Malabo domestication: Economic modeling of agricultural growth and investment strategy, case study of Kenya," IFPRI discussion papers 1813, International Food Policy Research Institute (IFPRI).
    2. Alfredo J. Mainar Causape & Pierre Boulanger & Hasan Dudu & Emanuele Ferrari & Scott McDonald & Arnaldo Caivano, 2018. "Social Accounting Matrix of Kenya 2014," JRC Research Reports JRC110385, Joint Research Centre (Seville site).
    3. Pierre Boulanger & Hasan Dudu & Emanuele Ferrari & Alfredo Mainar Causape & Jean Balie & Lucia Battaglia, 2018. "Policy options to support the Agriculture Sector Growth and Transformation Strategy in Kenya: A CGE analysis," JRC Research Reports JRC111251, Joint Research Centre (Seville site).
    4. Diao, Xinshen & Hazell, Peter & Thurlow, James, 2010. "The Role of Agriculture in African Development," World Development, Elsevier, vol. 38(10), pages 1375-1383, October.
    5. World Bank, 2010. "Liberia - Employment and Pro-Poor Growth," World Bank Publications - Reports 2966, The World Bank Group.
    6. Boulanger, Pierre & Dudu, Hasan & Ferrari, Emanuele & Mainar, Alfredo & Proietti, Ilaria, 2016. "Are input policies effective to enhance food security in Kenya? A CGE Analysis," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246954, African Association of Agricultural Economists (AAAE).
    7. Montaud, Jean-Marc & Pecastaing, Nicolas & Tankari, Mahamadou, 2017. "Potential socio-economic implications of future climate change and variability for Nigerien agriculture: A countrywide dynamic CGE-Microsimulation analysis," Economic Modelling, Elsevier, vol. 63(C), pages 128-142.
    8. Mariam Diallo & Fleur Wouterse, 2023. "Agricultural development promises more growth and less poverty in Africa: Modelling the potential impact of implementing the Comprehensive Africa Agriculture Development Programme in six countries," Development Policy Review, Overseas Development Institute, vol. 41(3), May.
    9. Alfredo J. Mainar Causape & Emanuele Ferrari & Scott McDonald, 2018. "Social accounting matrices: basic aspects and main steps for estimation," JRC Research Reports JRC112075, Joint Research Centre (Seville site).
    10. Thurlow, James, 2010. "Implications of avian flu for economic development in Kenya:," IFPRI discussion papers 951, International Food Policy Research Institute (IFPRI).
    11. Kamenya, Madalitso A. & Hendriks, Sheryl L. & Gandidzanwa, Colleta & Ulimwengu, John & Odjo, Sunday, 2022. "Public agriculture investment and food security in ECOWAS," Food Policy, Elsevier, vol. 113(C).
    12. Kamenya, Madalitso A., 2020. "The impact of public agricultural investment on food security and nutrition in ECOWAS," Research Theses 334764, Collaborative Masters Program in Agricultural and Applied Economics.

    More about this item

    Keywords

    Agriculture; Rural investment; Public investment; Poverty reduction; Inequality; Pro-poor growth;
    All these keywords.

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