Effects of agricultural commercialization on multidimensional poverty: Evidence from smallholder farmers in Kenya

Abstract

While previous studies have examined the impacts of agricultural commercialization on farm household welfare in terms of income, the implications on multidimensional poverty have rarely been analyzed. We examine the impacts of commercialization on farm household welfare measured in terms of multidimensional poverty, with income-based poverty indicators as robustness checks. Using data from a sample of 805 farm households in Western Kenya and various econometric models, we measure average treatment effects, continuous treatment effects, and impact heterogeneity. Commercialization significantly reduces multidimensional poverty headcount by 35% and share of multiple deprivations in education, healthcare, and living standards by 39% and income poverty gap by 86% above the mean of less commercialized households. The impacts on per capita income are positive and significant. Generalized propensity score estimates show that commercialization continuously reduces multidimensional and income-based poverty. Quantile regressions results show that the absolute gains in per capita income are larger for the better-off, suggesting that commercialization may contribute to higher inequality. The effects of commercialization on multidimensional poverty are significant across different quantiles, but are largely homogeneous. The policy implications are discussed. Key words: agricultural commercialization, welfare, multidimensional poverty, Kenya JEL codes: C21, I31, Q12, Q13 Acknowledgement : This research was financially supported by the German Federal Ministry of Food and Agriculture (BMEL) based on a decision of the Parliament of the Federal Republic of Germany (grant number 2813FSNu01). The authors thank Jonathan Nzuma (University of Nairobi) for his research cooperation.