Impact of agricultural sub-sectors on agricultural gross domestic product in Kenya

Abstract

The impact of the Agricultural sub-sectors (horticultural production, livestock production, fish farming and crop farming) and their contribution to the Agricultural National Economy are considered to be significant in attaining positive economic change mostly by developing economies. It was therefore important to find out if Agricultural sub-sectors performance can act as stimulus to Agricultural National Gross Domestic production or vice versa. This determined whether Agricultural sub-sectors were still significant sub-sectors that may transform Kenyan Agricultural Gross Domestic production. The study was developed owing to the underlying fact that, though Agricultural sector is considered to have highest percentage contribution to National Gross Domestic Product (25%), the sector has continuously performed poorly. The study had the following objectives: to determine the net effect of the horticultural sub-sector performance on Kenyan Agricultural Gross Domestic Product; to find out the relationship between livestock rearing output and Kenyan Agricultural Gross Domestic Product; to examine whether crop production impacts significantly on Kenyan Agricultural Gross Domestic Product; and to indentify whether fish farming output has significant relationship with Kenyan Agricultural Gross Domestic Product. To achieve these objectives, it was hypothesized that Agricultural sub-sectors do not significantly contribute to Kenya Agricultural Gross Domestic product. Time series data set was employed from 1980 to 2010. The variables of the study were Kenya Agricultural Gross Domestic Product, and Horticultural Production, Livestock Production, Crop Farming and Fish Farming. Unit root tests were conducted using Augmented Dickey-Fuller and Phillip-Perron test. Cointegration analyses were done using Johansen’s Multivariate Cointegration test methodology, and Granger causality. The results showed that there was a co-movement of the variables both before and after differencing the data. In the short run, there were mixed results from the various sub-sectors like fish farming indicating huge fluctuation between 1980 and 1985. This was not the case in the long run and the fluctuations were seen during early period of the study. The study also revealed that the entire five variables did actually co-move together with drifts and trends and were deterministic and stochastic in nature. The main conclusions therefore were that the variables output performance can be used to solve short run problems and that horticultural production, livestock production, and crop farming remains significant sub-sectors that drive the Kenya Agricultural Gross Domestic Production. The policy recommendations from the results were that the Government should design policies that are all inclusive of Agricultural sub-sectors in the overall macro-economic set up and promote domestic Production of agricultural products by reducing farming cost. Also, the Government should encourage mixed farming since variables have shown significant effect on Kenya Agricultural Gross Domestic Production.