Infrastructure, services, and smallholder income growth: evidence from Kenyan panel data

This essay investigates the relationship between rural household income growth and access to electricity, extension services and roads. Following Dercon et al (2009), I outline a household income growth model that includes access to these public goods as growth conditioners. I estimate the model using panel data on Kenyan smallholders covering the period 2000-2010. I find that the expansion of electricity, feeder roads and agricultural extension services are all important conditioners. Access to agricultural extension services has a particularly strong impact on growth. As an extension of the growth model, I investigate whether spatial spillovers in public goods exist and to what extent these spillovers contribute to household growth. I find strong evidence of spatial dependence in the growth process. Specification tests support a spatial Durbin model which allows for both endogenous spatial dependence in outcomes and exogenous spatial dependence through access conditions in neighboring areas. Direct and indirect spatial spillover effects have the greatest impact through feeder roads, suggesting that conventional (non-spatial) estimates of partial effects may be particularly prone to downward bias. Results from this study also indicate the importance of rural services and electricity to household growth outcomes, suggesting that studies of rural infrastructure which focus exclusively on road networks will miss important dimensions of rural accessibility and economic remoteness.