Empirical evidence helping to understand farm behavior in developing countries is
undisputable. Moreover, from the aggregate structural data in hand, its clear that farm household
and small farm business in East Africa are not static institution but adapt and evolve in response
to the changing economic circumstances and regulatory frameworks in the past three decades. In
these agriculture-based economies like Uganda, Kenya, Tanzania, and Ethiopia, smallholder
farming accounts for approximately 75 percent of total employment while the impact of
agriculture (production, investment) on the recent growth trends is very limited. For Instance, in
the past two decades, Uganda has registered strong economic growth, and is now making
significant and consistent strides towards poverty alleviations by improving the quality of life
and access to services such as education, health and community infrastructures. Therefore, in
order to continue to promote pro-poor economic growth in East Africa, a formal microeconomic
models of the farm household explaining consistently the dynamics of household consumption,
production, saving and investment is required. Such models will help and support budget
strategy as part of the implementation of the National Development Strategy, and postulate a
complete and clear understanding of the linkages/interplay between the structured agricultural
sector under market imperfections and the decisions in agricultural households, farms family and
farm business.
To do so, the objective of the paper is to test if small household farm consumption
behavior is inconsistent with the life cycle model in the presence of market imperfection, and the
interactions between labor (farm, off-farm work), consumption, production uncertainty, and land
tenure in East Africa. Therefore, an understanding of small household farm consumption
behavior and investment’decisons and the phenotype and archetype of farm household relation
to its family members, labor, farm and off-farm income is at stake. This paper, therefore shed
light on the different and distinct behavioral assumption and models upon the standard
microeconomic framework assuming that farm household in East Africa, and especially in
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Uganda are rational agents with well defined and characterized preferences. Consequently, this
paper provides an integrative framework for policy analysis on income dynamics at the
household level and capacity building towards poverty alleviation, which will greatly assist and
support the Annual Policy Implementation Review in East Africa, especially in Uganda. Now,
given that a dynamics and structured agricultural sector is required to alleviate poverty in SubSaharan
Africa, the future of all Sub-Saharan African countries will depend partially and greatly
to the ability of smallholder farm household to save and invest while they attempt to find the
best set of outcomes under market imperfection and rapid population growth especially in
Uganda. This is very important since agricultural investment increases food production capacity
and agribusiness activities, which adds quickly and exponentially to the Gross Domestic
products and stimulate productivity growth and capital efficiency uses in inputs. Thus, if East
African economies invest more in agriculture, they can increase their competitive efficiency of
domestic agriculture in world markets as price are pressure down from investment induced
technology, and also determine the wealth and health of their farm sector to spark access to
credit by leveraging future farm output