Effect Of Agricultural Performance On Human Development And Households’ Welfare In Kenya

ABSTRACT

The performance of agricultural sector in Kenya over the last twenty-five years has not only been declining but low as well. This has been attributed to various factors including; continued erratic weather conditions, high production cost including high prices of fertilizers and high quality seeds, inadequate access to farm inputs and relevant technology, poor implementation of agricultural reforms, policies and programmes, declining prices for primary commodities in the international markets, rapid rural-urban migration and recently the climate change phenomenon. Despite the declining and low performance of the agricultural sector; the country has realized impressive progress in development over time, in particular human development. This is evident as the country recently joined the category of countries with medium human development in 2015. Welfare at the household level has also improved significantly, for instance the percentage of households reported to be in a position of meeting their basic daily energy requirement -measure of food poverty- improved from 58 per cent in 1997 to 64 per cent in 2005 and further to 68 per cent in 2015. Moreover, the percentage of poor households reduced from 46 per cent to 38 per cent to 27 percent in the period 1997, 2005 and 2015 respectively. This implies that the country has realized improvement in development and individual’s wellbeing regardless of the declining and low performance of its majorly relied sector- agricultural sector. Most studies in Kenya have focused on agricultural commercialization and the performance of particular agricultural sub-sectors in specific regions of the country and its effect on development. No study has considered examining the general performance of the agricultural sector and its development and welfare impact in the country as a whole. Moreover, no study has used human development index to measure the country’s development level or equivalent variation as a measure of households’ welfare. This study sought to empirically investigating the effect of agricultural performance on human development in Kenya as its first objective. It also sought to determine the effect of agricultural performance on households’ welfare as its second objective. The study was limited to Kenya and used secondary time series data for the period between 1985 and 2017. Sources of the data include; the Human Development reports, databases of World Development Indicators and Central Bank of Kenya, Kenya Economic Survey and Kenya Integrated Household Budget Survey 2005-2006 and 2015-2016.To answer both the first and second objective, this study used Ordinary Least Square method to estimate parameters in the linear equations. This study concluded that agricultural performance-measured by annual growth of value added in agriculture- does not significantly contribute to the improvement of human development. It also established that agricultural performance does not contribute to households’ welfare despite being positively related. Variables that contributed to the improvement of human development include, annual growth of service, access to technology- measured by mobile cellular subscription, savings, lending interest rate and trade. On the other hand, annual growth of service, trade and tax were found to be contributing significantly to the improvement of households’ welfare besides being positively correlated. It is worth noting that annual growth in service and trade contribute significantly to the improvement of both human development and households’ welfare in Kenya besides having a positive relationship.