Food Pricing Policy and Rural Poverty: Insights from Maize in Kenya

Abstract

This study estimates the effects on poverty resulting from maize price changes associated with the operations of the maize marketing board in Kenya. We consider both supply and demand responses and the accompanying adjustments in rural labor markets in estimating a second order approximation to equilibrium income changes. We then use stochastic dominance techniques to generate poverty rankings between the distribution of income with the effects of the government marketing operations and the distribution of counterfactual incomes. This approach effectively addresses concerns regarding the sensitivity of poverty estimates to the type of poverty measure used. Results indicate that the price-elevating effects of government maize marketing operations have exacerbated rural poverty in all regions of the country except the region from which the largest part of surplus maize originates.