Discussion Paper No. 34 of 2004 on Sources and Determinants of Agricultural Growth and Productivity in Kenya

Abstract

Agriculture is the most important sector in the Kenyan economy given its contribution to employment, foreign exchange, food, and its linkages with other sectors of the economy. Indeed, the sector’s performance directly mirrors that of the overall economy. However, in last ten years or so, the performance of the sector has been steadily declining, culminating in a negative growth rate in 2000. With over 80 per cent of the Kenyan population (the majority of whom are poor) living in the rural areas, the poor performance of the sector has had serious implications on poverty and living standards of the people. Declining agricultural growth has been identified as a major determinant of poverty in the country. Reversing this trend is no doubt an immediate development challenge for Kenya. Addressing this challenge requires knowledge of what drives agricultural growth and productivity. This study explores the sources and determinants of agricultural growth and productivity in Kenya for the period 1965-2001. The ‘growth accounting’ approach is used to identify the sources of growth, while econometric techniques are used to assess the determinants. The study utilised secondary information from the World Bank Africa Database and the KIPPRA Agricultural Data Compendium. The study establishes that most of the agricultural growth in Kenya is attributable to factor inputs – labour, land and capital. Growth in output not attributed to factor inputs or total factor productivity has in the entire period accounted for only 10 per cent of growth. Labour has been the most important source of growth and accounted for about 48 per cent of the total growth. Land is also a very important determinant of agricultural growth and productivity. The study has also established that the Kenya’s trade policy, climate, and government expenditure on agriculture are important determinants of agricultural total factor productivity growth.