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Working paper 37-Has Kenyan Farmers’ Access To Markets And Services Improved? Panel Survey Evidence, 1997-2007

Author(s):  Jordan Chamberlin and T.S. Jayne


Introduction

Smallholder farmers’ access to markets and agricultural support services has been a major concern for Kenyan policy makers since independence. Agricultural policies have often been conceived as a necessary response to weak market access. It is commonly perceived that private traders and input suppliers tend to locate and confine their business close to towns and market hubs where infrastructure is relatively well developed. Consequently, farmers residing in the more remote rural areas are largely cut off from markets and services, with obviously adverse implications for farm productivity growth and poverty reduction.

This paper measures changes over time in indicators of market access as revealed through household panel survey data. Some of these access indicators reflect investment patterns by national and local government, while others reflect investment patterns of private entrepreneurs. We use these data to evaluate the current state of Kenyan smallholders’ access to markets and services, determine how these access indicators have changed over the 1997-2007 period, and examine the geographic pattern of public and private investments in infrastructure and market access. Distinguishing between public and private investment-driven changes is an important way to understand the private sector’s response to the liberalization of input and food markets.

This work is guided by a number of issues about market liberalization. First, there remains major controversy as to whether market liberalization has stimulated major private sector investment in input and output marketing services and improved smallholders’ access to these markets. One hypothesis to test would be that there has been rapid improvement in smallholders’ access to services provided by private firms. A more nuanced view might lead to the hypothesis that market liberalization has created investment incentives that differ spatially according to where the marginal payoffs to investment are greatest.

Under the assumption that markets are at a nascent state of development in almost all areas of Sub-Saharan Africa, we might expect that the marginal payoffs to private sector investment would be greatest in areas of higher productive potential and, hence, be concentrated in such areas, whereas relatively little private sector investment would have occurred in areas of low agricultural potential. A more pessimistic view of private sector response to liberalization might produce the hypothesis that smallholders’ proximity to marketing services provided by private firms has remained weak and relatively unchanged in low- and high-potential areas alike since the liberalization process began.

Another set of hypotheses revolve around the criteria driving public investments. For example, we might expect that public investments in infrastructure and public services are more likely targeted to areas of high population density, or perhaps to relatively underprivileged areas for equity reasons, and not necessarily to areas with the highest financial returns. Moreover, because of administrative reform starting in 2004 aimed at decentralizing the control over public expenditures, e.g., the Constituency Development Fund (CDF), it will be interesting to evaluate whether household-level indicators of access to infrastructure and services provided by the state have improved since 2004.

The remainder of this paper is organized as follows. Section 2 describes the data used in the analysis. Section 3 presents patterns and trends in indicators of market access in 2007, 1997, and the changes over this 10-year period. Section 4 presents data on the variation across households in these access indicators to examine the dispersion around the medians. Section 5 examines geographic differences in indicators of access, focusing on whether access to infrastructure and markets have improved more over the past 10 years in the relatively low-potential or high-potential areas.

This section also differentiates between access indicators that reflect private sector investments (such as the distance that households travel to the nearest fertilizer retailer and point of maize sale) as opposed to public sector investment (such as the distance from the household to the nearest motorable road and source of electricity). Section 6 determines the degree of correlation across these indicators at the household level. Finally, we present the main conclusions and consider the significance of these findings for both public policy in Kenya and for the undertaking of research on market access.

Has Kenyan Farmers' Access To Markets And Services Improved? Panel Survey Evidence, 1997-2007

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