Research Activities Under the Project “Rural Markets, Natural Capital and Dynamic

Poverty Traps in East Africa”

Presentation to BASIS CRSP Technical Committee

October 11, 2002

College Park, MD

Chris Barrett, Cornell Universityand

Festus Murithi, Kenya Agricultural Research Instituteon behalf of the project team

Contemporary Poverty Reduction Strategies in East Africa

The PRSP process is focusing government, donor and civil society efforts on poverty persistence.

Efforts particularly directed at chronic poverty and vulnerability in rural areas. Thus, PRSP in Kenya based heavily on KRDS (Kenya Rural Development Strategy) and new Malagasy government has made rural poverty reduction is top priority.

Soils degradation and market access widely viewed as most important limiting factors in improving agricultural productivity and rural incomes

Contemporary Poverty Reduction Strategies in East Africa

Effective, policy-relevant research must therefore target the core question of poverty persistence in rural areas, with special attention to market access and soils degradation/rehabilitation.

Our BASIS CRSP project aims to integrate research, training and outreach activities to address this need.

Toward A Theory of Poverty TrapsExisting, largely macro-level theories of

poverty traps (“new” growth theory)

The multidisciplinary literatures on livelihoods and on technology adoption point toward an alternative approach that seems especially well-suited to rural Africa and our cases in Kenya and Madagascar.

Toward A Theory of Poverty TrapsOpportunity set mappings/ density plots (conditional on quality-adjusted productive assets)

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Toward A Theory of Poverty TrapsActivity choice and productivity/income differences

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Toward A Theory of Poverty TrapsImplied wealth dynamics: distinct classes emerge

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Implied causality of poverty trapsFour key sources of poverty traps:

- Meager stocks of productive assets- Rudimentary production/processing technologies

and nonfarm opportunities- Weak markets and nonmarket institutions- Risk exposure and limited risk management

Research design implication: Need household-level data to establish asset/income/productivity dynamics, measures of shocks, livelihood strategy choice, and market access

Empirical TasksProject objective 1:

1) Describe welfare and resource dynamics empirically

2) What is happening over time to the poor? Who climbs out of poverty? Who is trapped in poverty?

3) What is happening to the natural resource base on which the poor in particular depend for rural livelihoods?

Empirical TasksProject objective 2:Test four hypotheses about poverty traps in East Africa:

(i) High return production strategies (e.g., livestock) exhibit increasing returns at low production levels, with a minimum efficient scale of production beyond the means of the poor lacking adequate financing.

(ii) Poor market access creates significant fixed costs to market participation, giving larger producers net price advantages and inducing poorer producers in areas of weak market access to opt out of markets in favor of low-return self-sufficiency.

Empirical TasksProject objective 2 (continued):

(iii) Poorer households lacking access to capital to finance productive investments may be unable to undertake lumpy investments, regardless of their expected returns

(iv) Risk and subsistence constraints impede long-term investment for asset accumulation and productivity growth among poorer, more risk averse households.

Empirical TasksProject objective 3:Use dynamic process modeling methods to replicate

observed patterns and then to explore how the existence of poverty traps conditions natural resource conservation, particularly soil quality dynamics that affect future agricultural and labor productivity and food security.       

“The soil said to man, ‘take good care of me, else when I get hold of you I won’t let your soul go free.’ ”

-Kipsigis proverb

Empirical TasksProject objective 4:

Through bioeconomic model simulations and both qualitative and quantitative empirical work, identify and document effective policies, technologies and programs to combat dynamic poverty traps in this setting.

Examples:- new agroforestry technologies- restocking herds after droughts- contract farming schemes that address multiple factor market failures

Preliminary evidenceObjective 1: Describing welfare/resource dynamics

Examples: herd dynamics in northern Kenya

land transitions in western Kenya

Northern Kenya Herd DynamicsJune 2000 - September 2001

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Farm sizes in Madzu in 1989 and 2002

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Preliminary evidenceObjective 2: Explaining

observed poverty trapsIncreasing returns and minimum

efficient scales of adoption:

i) SRI adoption in Madagascar

ii) Education and nonfarm

earnings in C/W Kenya

iii) Herd mobility in N Kenya

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Preliminary evidenceObjective 2: Explaining observed poverty trapsMarket access :

Market access comparisons from

- central-western Kenya

- south-central highlands Madagascar

(education, nonfarm, dairy cattle,

market access, vertical integration

of input/output marketing systems)

Preliminary evidenceObjective 2: Explaining

observed poverty trapsAccess to finance:

SRI adoption in Madagascar

Education in rural Kenya

(N/W Kenya in particular)

Microfinance in northern Kenya

Irrigation investments

Preliminary evidenceObjective 3: Bioeconomic modeling tool

CLASSES model prototype near completion. Short course begun in Kenya in June and will complete this month in Ithaca.

NSF Biocomplexity project will enrich and extend CLASSES significantly in the Kenya sites

Thank you!Thank you!We welcome your comments and We welcome your comments and

suggestions on this projectsuggestions on this project