Economics of rural urban interaction: Case study of Kikuyu Division

Abstract

This paper examines the impact of urbanization

on farmers'management decisions on farms in the "ft-inges" o

Nairobi City with a view to identify the factors responsible fo

farm dis-investment in favour of rental housing investment.

The farming business is evaluated using farm gross margin

and a standard housing evaluation technique is used to assess t

value of the rentals. The value of farm output is subsequently

scaled by an uncertainty factor; The values of the two invest

options are then discounted over a selected range of discount r

for a period of five years,the effective life of wooden rental~

predominant type of rentals constructed by the farmers.

- An econometric model is used to isolate factot-s

responsible for allocation of land to rental housing constructi(

by the land owners.

The study shows that the farmers investment decisions a rational. Land subdivision is identified as the main cause o disinvestment; "Jhile rurel electrification and access roads ha significan-tinfluences on the attractiveness of rentals in the

The paper suggests that the areas which are already in t

middle of the economic transformation should be encouraged to

convert their Iand to rentals