Agriculture and economic growth : conceptual issues and the Kenyan experience

This study, using empirical evidence from Kenya, expands this conceptual model by including non-market linkages through which agricultural productivity contributes to growth in non-agricultural sectors. These linkages include: the spill-over effects of skills learned by government and industry in managing agricultural development; the improved efficiency of resource allocation which results from shifting control of resources from urban to rural households; and the higher productivity of capital investments in rural versus urban areas. A simulation in terms of "growth multipliers" finds that the contribution of agriculture to Kenya"s economic growth is two to three times that of non-agriculture; that is, a dollar of income in Kenya"s agriculture sector generates an additional 64 cents of income (most of it in non-agriculture), versus 23 cents for non-agriculture. Other simulations -- e.g., of the growth multipliers associated with public investment in agriculture and non-agriculture -- produce similar results. Overall, up to one-fifth of non-agricultural productivity growth in Kenya can be credited to growth in agricultural productivity. While cautioning that these results are preliminary, the report strongly suggest that strategies to promote investments in agriculture can have large payoffs in terms of economic growth, in Kenya and other developing countries.