LIVELIHOOD DIVERSIFICATION AND IMPACT OF OFF-FARM INCOME ON AGRICULTURAL INVESTMENT IN NYERI AND KAKAMEGA COUNTIES, KENYA

Abstract

Aspects of livelihood diversification and impact of off farm income on agricultural investment and productivity have not received enough empirical research. The question whether off farm activities and the income there of enhance or impede agricultural investment and productivity is an area that requires further research. This study examined aspects of agricultural diversification and impact of off farm income on agricultural investment in Nyeri and Kakamega Counties of Kenya. The objectives of the study were to quantify the levels of diversification at crop, livestock and income levels and to assess the impact of off-farm income on agricultural investments and productivity. The study relied on a panel data set collected in 2002, 2008 and 2013 from two counties in Kenya namely Nyeri and Kakamega. The data was collected in 10 villages and 300 households sampled in the two counties. The Herfindahl index together with some descriptive statistics was used to analyze the degree of diversification. The tobit and double hurdle models were used to analyze the impact of off-farm income on input use, agricultural specialization and intensification. The key findings of this study are that households in Nyeri and Kakamega counties are diversifying (villages had Herfindahl indices of over 0.8) rather than specializing in their agricultural activities. The impact of off-farm earnings on input use, agricultural specialization and intensification was found to be minimal. The tobit and double hurdle models showed that non-farm income had negative coefficients on adoption and intensity of agricultural input use. It is recommended that policies that will encourage a shift from promoting broad agricultural diversification to facilitating specialization among households that are likely to do should be designed. A multifaceted approach to policy that considers other constraints to intensification and specialization especially with regard to technology generation returns to input use, input delivery systems and effectiveness of extension should also be used.