Optimal Resource Allocation in Socio-Ecological Systems: Implications for Sustainability in Kenyan Rangelands*

This paper explores resource allocation decisions in Kenyan rangelands. We analyse choice decision of the producer to enter or not to enter livestock production, and the optimal herd size that is expected to yield maximum benefits to the herder. We apply the Heckman two-stage estimation procedure to correct for selectivity bias in the livestock production, optimal income and optimal herd size process. The preliminary results show that tenure security, assets ownership and location of the household are important determinants of the decision to hold livestock and the resulting optimal stocking rates and incomes. We find no evidence of selectivity bias in the decision to hold livestock implying that characteristics of households that hold livestock do not differ with characteristics of household who do not keep livestock. However, we find evidence of self-selection in the determination of participation in livestock production and the optimal stocking rates. Main barriers to sustainable development in the district are identified to include population pressure, lack of supporting institutional framework and poverty. * The Author wishes to thank resource persons and participants of the First School on Ecological Economics at the Abdus Salam International Centre for Theoretical Physics (ICTP), Italy for useful comments on an earlier draft of this paper. The usual disclaimer applies.