Steve Onyeiwu

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Determinants of Income Poverty in Rural Africa A
Comparative Study of Kenya and Nigeria

• Steve Onyeiwu
• Jialu Liu
• Department of Economics, Allegheny College,
  Meadville, Pennsylvania, USA

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Motivation

• Questions About Africa the Millennium
  Development Goals
• The Debate Over Growth and Aid (Jeff Sachs Versus
  Bill Easterly)
• Aid Fatigue Billions of in Aid Yet High
  Poverty Rates
• Impressive Growth Rates,High Incidence of
  Poverty and Inequality
• Poverty More Severe in Rural African Villages
  (Rural-Urban Migration Urban Congestion/Slums)
• Beyond Growth and Aid Enhancing the
  Income-Earning Capacities of Rural Households
  Amartya Sen (1989)

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Goals and objectives

• What Determines the Income-Earning Capabilities
  of African Rural Dwellers?
• Analysis of Surveys in Kenya and Nigeria to Gain
  Insight into Socio-Economic Demographic
  Characteristics of Rural Households in Africa
• Comparison of Rural Households in Kenya and
  Nigeria ---are Africans Really Heterogeneous?
• Use of Panel and Cross-Sectional Regressions on
  Survey Data to identify the Determinants of
  Income
• Explore Policy Implications for Poverty
  Alleviation

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Literature review

• Lack of Productive Assets as a Major Constraint
  but Controversy About Most Important Assets
• Mehrotra and Delamonica (2007) Excess Labor
  Supply, then Land is an Important Asset that
  Determines Income Level. Rural poverty in East
  and Southern Africa attributable to concentration
  of landholdings. White Farmers in Zimbabwe
  Absentee Landowners
• Krishna and Shariff (2011) Distinction between
  assets that prevent households from falling into
  poverty, and those that help them get out of
  poverty. Land ownership can help avoid falling
  into poverty, but cant extricate from poverty.
  Proximity to a city is key for alleviating
  poverty. Non-agricultural sources of income key
  to poverty alleviation

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Literature review (cont.)

• Khandker and Koolwall (2010) Proximity to an
  urban area is key to higher income and poverty
  alleviation
• Alarya, et al. (2011) Irrigated agriculture and
  non-farm activities are more important than
  livestock ownership.
• Income Diversification Salience of Non-Farm
  Sources of Income (Turner, et al. (2011),
  Haggblade and Reardon (2010)
• Critics of Income Diversification----Rural
  Dependency Bryceson (2004), Eastwood (2006)
• Our Contributions to Literature use of a
  theoretical model, surveys and econometrics to
  investigate the salience of farm and nonfarm
  sources of income for the rural poor
• Offer Insights Regarding Why Growth Has Not Been
  Poverty-Alleviating in Rural Africa

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Theoretical model

• Each household spends an optimal amount of time u
  working on farm, and the rest on non-farm work.
• y the household income
• h human capital
• l labor
• z land
• k productive capital and livestock

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Theoretical model

• For households with no productive capital (k0)
  and human capital (h0)
• ? they choose u1 (100 time in the farm sector)
• Their per capita income is

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Theoretical model

• For household with some productive and human
  capital (kgt0, hgt0)
• They choose
• Their per capita income becomes

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Empirical model

• log(yi/li) is the logarithm of per capita
  household income.
• di is a vector including household size, the
  average age of adult family members, proportion
  of female family members, farm labour,
  non-working family members, disabled members, and
  students.
• hi is a proxy for average education level of the
  household.
• zi represents land holding and land value.
• ki is a vector of livestock and production assets.

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Conclusions

• Non-Farm Activities are More Important than
  Farming as Income Sources
• Occupational Specialization Exacerbates Poverty
  diversification is good for households.
• Sub-optimal investment in human capital by rural
  households explains the weak link between growth
  and poverty alleviation. It also explains rural
  inequality.

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Conclusions (cont.)

• Investment in Education Enhances Opportunities
  for Non-Farm Income
• To Reduce Feminization of Poverty, Education
  Should be Targeted at Women
• Intensify Efforts to Reduce Fertility Rates
• Cultural Attitudes to Women Education and
  Fertility Need to Change