The Impact of Production Risk on the Choice of the Optimal Level of Inputs, Adoption, and Welfare of Small Holder Intergrated Agriculture Aquaculture Farmers in Kenya
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Date
2025-10
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Kenyatta University
Abstract
Integrated Agriculture Aquaculture has been promoted in Kenya as a climate-smart approach capable of increasing productivity, stabilizing incomes, and improving the welfare of smallholder farmers. Despite these potential benefits, adoption remains low, largely because farmers operate under significant production risk. This study examined how production risk influences optimal input-use decisions, adoption, and welfare outcomes, measured through productivity and household income, among 427 smallholder farmers across Busia, Kakamega, Siaya and Nyeri counties. Using the Just–Pope stochastic production framework, the Heckman selection model, and the Endogenous Switching Regression model, the study estimated the risk properties of key production inputs used in integrated agriculture aquaculture systems, analyzed how risk shapes adoption choices, and evaluated the effect of production risk on productivity and income variability. Results from the first objective revealed that inputs have distinct risk characteristics which influence how farmers allocate resources. Among adopters, seeds and organic fertilizer increase output variability due to the complexity of managing integrated systems, while non-adopters experience risk-reducing effects from labor, chemical fertilizer, and organic fertilizer. Overall, adopters face lower total variance elasticity, showing that integrated aquaculture stabilizes production by diversifying output streams. Results from the second objective showed that production risk emerges as a major determinant of adoption. Higher expected profits encourage farmers to adopt and intensify integrated agriculture aquaculture use, whereas greater profit variability and downside risk significantly discourage adoption. Adoption is further shaped by a farmer’s education level, labor availability, training, land ownership status, topography, irrigation access, and distance to markets, with awareness consistently appearing as one of the strongest predictors of adoption. Objective three showed that integrated agriculture aquaculture adoption significantly enhances productivity, with adopters achieving higher Interspatial Total Factor Productivity due to more effective use of seed, labor, organic fertilizer, capital, and irrigation. Non-adopters would experience higher productivity if they adopted integrated aquaculture, as evidenced by a negative and significant treatment effect showing that they forgo productivity gains by not adopting. Results from the fourth objective showed that adoption also improves household income and reduces its variability, driven by diversified revenue streams, nutrient recycling efficiencies, and improved labor utilization. Factors such as education, credit access, labor availability, organic fertilizer use, capital investment, irrigation access, and closer market proximity further increase income among adopters. These findings indicate that production risk is a central but often overlooked determinant of farmer behavior, influencing both the decision to adopt integrated agriculture aquaculture and the welfare gains that follow. Although integrated agriculture aquaculture clearly improves productivity and income stability, farmers’ risk perceptions continue to limit widespread adoption. To address these constraints, the study recommends targeted risk-aware interventions. These include training to manage inputs that are risk-increasing within integrated systems, improved extension services that focus specifically on risk mitigation, better market access, and tailored credit products for integrated farming. Promoting enterprise diversification (fish, crop, livestock) and developing financial safety nets such as insurance or guarantee schemes would further enhance the stability and effectiveness of integrated agriculture aquaculture
Description
A Thesis Submitted in Fulfilment of the Requirements for the Award of Degree of Doctor of Philosophy (Agricultural Economics) in the School of Agriculture and Environmental Sciences, Kenyatta University. November, 2025
Supervisors
Macharia Ibrahim Ndegwa
Richard.M. Mulwa