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Research Topics in Agricultural and Applied Economics, Vol. 2, 2011, 121-142 121 Anthony N. Rezitis (Ed) All rights reserved - © 2011 <strong>Bentham</strong> <strong>Science</strong> Publishers Ltd. CHAPTER 9 Global Crisis and Agricultural Public Spending in Kenya: A SAM Multiplier Approach Maria Sassi * Department of Management Studies, University of Pavia, 27100 Pavia, Italy Abstract: This paper focuses on Kenya with the purpose of understanding the role of public spending in the primary sector in addressing the current food crisis and in contributing to overall economic growth and alleviating poverty and food insecurity according to the first Millennium Development Goal. The empirical investigation, based on the 2003 Social Accounting Matrix, integrates two distinguished models the unconstrained and constrained multiplier models for a better characterisation of the country’s economic linkages in a context of international market volatility. Results point to the potential positive impact of government intervention in agriculture on economic development and its limits, particularly with reference to the growth-equity nexus. Keywords: Food security, agricultural public expenditure, social accounting matrix, multiplier analysis, Kenya. INTRODUCTION On 9 June 2002, the New Partnership for Africa’s Development endorsed the Comprehensive Africa Agriculture Development Programme (CAADP) as a framework for contributing to food insecurity and poverty alleviation in Africa and as part of the strategy aimed at reaching the first Millennium Development Goal (MDG) of halving poverty and hunger by 2015 (CAADP, 2009). In July 2003, after several meetings, the Ministers for Agriculture and of the African Union Assembly of the Head of State and Government adopted the Maputo Declaration that provided political support to the CAADP and become a reference point for planning its actions (FAO, 2004). The Declaration includes important resolutions regarding agriculture but prominent among them was the commitment to the allocation of at least 10 percent of national budgetary resources for their implementation within five years, that is, by 2008 (Assembly/AU/Decl. 7(11), 2003). These obligations are based on the acknowledgement that agriculture is a strategic sector for development in Africa and that inadequate investment has been one of the main constraints to its growth. Consequently, with the Maputo Declaration, agriculture is put at the heart of the development agenda and public agricultural spending is considered the core method for promoting its role (Fan et al., 2009). This view has been recently reconfirmed and is widely shared at the international level at a time in which volatility on international markets is putting pressure on global food security. For example, the 2008 World Development Report by the World Bank underlines, as a main recommendation, the need for a more prominent place of agriculture in government and donor priorities in order to capture the sectoral potential for development (World Bank, 2008). Moreover, with the Joint Statement on Global Food Security produced by the G-8, the international community has put agricultural growth for food security on the top of the political agenda. This message has a specific importance in Sub-Saharan Africa (SSA) where agricultural growth is a pre-condition for economic growth and development, beyond the contribution that mining and tourism can give to this process (de Janvry & Sadoulet, 2009). Further, over 80 percent of the population in the region depends on the sector and 70 percent of them live in poverty conditions in rural areas where they are mostly reliant on food production as small farmers or agricultural labourers (Odhiambow, 2007; FAO, 2001). Thus, mobilizing resources towards agricultural productivity growth is of essential importance in generating food supply and income for improving access to food in SSA. In this context, the international community also recognises public spending in the primary sector as one of the most direct and effective interventions in addressing the current food crisis and in contributing to overall economic growth to alleviate poverty and food insecurity, according to the first MDG (Fan & Rosegrant, 2008). This perspective requires putting on the top of the current research agenda the identification of the mechanisms that connect the relevant socio-economic groups and overall development to agricultural growth supported by public investment. The paper focuses on Kenya and addresses this issue with a twofold objective. The first is concerned *Address correspondence to Maria Sassi: Department of Management Studies, University of Pavia, 27100 Pavia, Italy; Tel: +39-0382-986465; Fax: +39-0382-986228; E-mail: msassi@eco.unipv.it
122 Research Topics in Agricultural and Applied Economics, Vol. 2 Maria Sassi with revealing the economic structure of Kenya as a framework for a better interpretation of the nature and extent of the linkages among public spending in agriculture, economic growth, income generation, and poverty and distribution implications for different categories of households, which represents the second purpose of the analysis. Frequently, the empirical literature refers to Social Accounting Matrices (SAMs) and fixed-price multiplier models to address these aspects; particularly, the latter are adopted for a first-cut estimate of a policy or external shock due to their simplicity and transparency (Round, 2003). The paper follows the same approach, introducing some advancements. It considers the 2003 SAM for Kenya (Kiringai et al., 2006) properly adjusted to the specific objective of the study and, first, simulates the effects of an exogenous demand-side shock represented by a change in government spending on agriculture, based on an equation system referred to an unconstraint SAM multiplier model. Then, the empirical investigation goes further than this traditional perspective in order to take into account, by means of a constrained SAM multiplier approach, the possibility for the agricultural sectors not to be able to respond to changes in demand. This assumption is particularly appropriated for Kenyan agriculture where the frequent and severe shocks to production systems and the prevailing small size farms make the sector mostly supply-constrained. The traditional perspective only seldom limits the supply capacity of the primary sector. Consequently, the impact of linkages effects is overestimated (Haggblade et al., 1991). The study takes into consideration also the loss of government intervention effectiveness at the introduction of supplyconstrained sectors introducing a specific indicator and pays particular attention to the impact of the simulations on household expenditures and income accounts with the objective of understanding the implications on poverty reduction. The paper begins with an analysis of public spending on agriculture in Kenya. Then, the SAM for the country is presented. A third section is dedicated to methodological issues where the constrained and unconstrained SAM multiplier models are illustrated. Finally, results achieved are presented and discussed in the conclusion. PUBLIC SPENDING ON AGRICULTURE IN KENYA From 2000–2005, following the Maputo Declaration, SSA has, in total, increased the share of agricultural expenditure, on the overall government spending and on the agricultural GDP, at a significant rate if compared with the other developing regions; in 2005 the area reached the 6 percent of total budget target (Fan et al., 2009) (Table 1). However, this average aggregate data masks important country variations: budget allocation by governments has been, in the majority of them, low, sometime declining and with a limited effectiveness. For example, according to the available information for a sample of 35 over 47 SSA countries, only 8 are above the 10 percent target (Ghana, Mali, Malawi, Ethiopia, Senegal, Guinea, Niger, and Burkina Faso), for 14 this share is between 5 to 10 percent (Chad, Mozambique, Gambia, Madagascar, Togo, Zambia, Zimbabwe, Nigeria, Benin, Mauritania, Namibia, Tanzania, Sudan, and Uganda) while 13 devote less than 5 percent of their total budget to agriculture (Swaziland, Kenya, Burundi, Botswana, Cameroon, Rwanda, Lesotho, Mauritius, Central African Republic, Cote d’Ivoire, Congo Democratic Republic, Gabon, and Guinea Bissau). In addition to this, over time, donor contributions to agriculture have declined dramatically. In general terms, despite the well recognised potential of the right investment in agriculture, particularly in favour of smallholder farmers, for fighting hunger and poverty, in SSA there has been a gross under-investment in the sector over the years. Table 1: Total and agricultural government spending by developing region (1980-2005) % value % change 1980 1990 2000 2005 1980-1990 1990-2000 2000-2005 1980-2005 Gov. exp. on GDP 41,87 29,06 28,22 29,64 -30,59 -2,89 5,03 -29,20 North Africa Agr. exp. on total 6,07 5,34 5,68 3,68 -11,99 6,30 -35,29 -39,46 Agr. Exp. on agr. GDP 14,76 8,71 10,97 7,96 -40,98 25,94 -27,43 -46,07 Gov. exp. on GDP 18,51 22,51 28,83 28,92 21,60 28,07 0,31 56,23 SSA Agr. exp. on total 7,07 5,48 3,78 6,34 -22,43 -31,06 67,80 -10,26 Agr. Exp. on agr. GDP 4,09 3,73 3,67 6,42 -8,80 -1,60 74,93 56,96
Page 2 and 3: Research Topics in Agricultural and
Page 4 and 5: CONTENTS Foreword i Preface ii Cont
Page 6 and 7: ii PREFACE The aim of the e-book se
Page 8 and 9: iv Alexander Pailas Agricultural Ba
Page 12 and 13: The Italian Demand for Imported Vir
Page 14 and 15: 20 Research Topics in Agricultural
Page 18 and 19: New Trends in Consumer Needs Resear
Page 20 and 21: Consumer Knowledge of Animal Welfar
Page 30 and 31: Means-end Chain Analysis of Food Pr
Page 36 and 37: Global Crisis and Agricultural Publ
Page 42 and 43: Measuring Labour Productivity and M
Page 44: Index Research Topics in Agricultur

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