Liberalisation and smallholder agricultural development : a case study of coffee farms in central Kenya

A.M. Karanja

Research output: Thesisinternal PhD, WU


<em><u><FONT FACE="Book Antiqua,Georgia" SIZE=2></em></u></font><FONT FACE="CG Times,Times New Roman"><p>Key words, <em>Market reforms, smallholder agricultural development, prices, institutional framework, resource allocation and productivity, efficiency, policy interventions</p></em></font><FONT FACE="CG Times,Times New Roman" SIZE=3></font><FONT FACE="CG Times,Times New Roman"><p>Agricultural production and market participation by smallholder farmers in Kenya continues to decline despite the market reforms undertaken in the last one decade. This study examines the factors behind this decline. The objectives of the study are to evaluate agricultural price evolution and volatility, institutional changes, smallholder farmer's resource allocation and productivity as well as their efficiency in the advent of market reforms. The study focuses on smallholder coffee farms in Central Kenya province.</p><p>Four separate but related analytical models are applied in this study. Various time series statistical methods including an ARCH (M) model are applied to analyse the price evolution and volatility for the period 1985 to 1999. Institutional changes are analysed using an exchange configuration framework, which is theoretically founded on new institutional economics. A bivariate probit selectivity model that relates household's credit and land constraints to resource allocation and farm productivity is also applied. Finally, a stochastic translog cost frontier model is applied to measure cost efficiency.</p><p>The study shows that market reforms in Kenya, although of the priciest type, did not create sufficient conditions to arrest the decline in agricultural sector terms of trade and producer prices. The reforms are also associated with higher price volatility with attendant increases in price volatility costs to smallholder farmers. Institutional reforms lagged behind the market reforms, a situation that constrained access to agricultural services, supply of agricultural credit, private sector participation, while increasing transaction costs to agricultural producers. The study also shows that constraints in factor markets, high transaction costs and risks tempered resource allocation towards subsistence production with consequent declines in productivity and market participation. Smallholder farmers in Kenya are shown to have medium to high level of production efficiency that is comparable to efficiency levels in other developing countries. The study consequently concludes that smallholder-based development strategy is still an efficient mode of organising agricultural production. While there is still room for improving smallholder farmer levels of efficiency through better resource allocation and re-allocation, the highest source of growth is likely to come from technology development that shifts the production frontier outward.</p><p>The conclusions points to the need for policy interventions that mainly focuses on creating institutional frameworks necessary for reducing transaction and production costs, price and institutional performance risks, increasing access to production resources, services and markets by smallholder farmers. The study also identifies and recommends specific policies to enhance private sector participation as well as the social capital of smallholder farmers. This study views these as the main challenges to be tackled in the second-generation reform programs for agricultural development, prosperity and poverty alleviation in Kenya and Sub-Saharan Africa in general.</p></font><FONT FACE="CG Times,Times New Roman" SIZE=3></font><em><FONT FACE="Book Antiqua,Georgia"><p> </p></em></font>
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Wageningen University
  • Kuyvenhoven, A., Promotor, External person
  • Moll, H.A.J., Promotor, External person
Award date2 Apr 2002
Place of PublicationS.l.
Print ISBNs9789058086037
Publication statusPublished - 2002


  • agricultural development
  • small farms
  • coffee
  • production
  • farm management
  • trade liberalization
  • kenya


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