(2016). We extend this analytical framework to also examine the impact of external price shocks and conflict events on income and consumption.

We find substantial income growth, particularly in crop incomes, for both the average household and households in the bottom 40 percent of the consumption distribution. Growth in crop income was accompanied by increasing commercialization with 72 percent of farmers in the bottom 40 percent selling their crops in 2012 compared to 60 percent in 2006. We find that much crop income growth during this period is explained by good weather, peace and improved efficiency in food markets, rather than technological change in the nature of agricultural production. Rainfall and prices together can account for 51 percent of the improvement in crop income for all households, and 66 percent of the improvement in crop income for the bottom 40 percent respectively. Although the overall progress during this period was good, there were years in which the prices of agricultural products fell and rainfall conditions were not good, resulting in negative average crop income growth for some households. This was particularly the case in the poorer and more vulnerable Northern and Eastern regions, and as a result their overall income growth and progress in reducing poverty was slower.

Diversification of income offered households the ability to protect consumption from weather shocks, but it was less effective in mitigating price income shocks. Education is essential to enabling households to diversify and, as a result, to insure consumption from weather shocks. However, diversification alone was not enough to fully protect consumption from shocks. As a result, a decrease of 10 percent in the price of maize and beans results in a 5.1 percent reduction in consumption for the average household, and a 10.5 percent reduction in consumption among the bottom 40 percent. A decrease in rainfall of 10 percent results in a decline of 4.8 percent in per capita consumption for the average household.

The significance of external forces in driving income and consumption growth among the poorest households during this period of poverty reduction underscores the role that macro conditions and stability play in determining the fortunes of households. The government’s success in securing peace in the north of the country and in allowing the development of agricultural markets for farmers to take advantage of new regional trade opportunities ensured widespread welfare gains. However, it also underscores that these gains are vulnerable and can be easily reversed by events beyond a government’s control such as bad weather or price drops.

We also document that despite seemingly favorable conditions for agricultural investment during this period, there were very few changes in the way agricultural households produce. Specifically, few households increased adoption of improved inputs. Although it is not possible to calculate the returns to the use of inputs from the observational data available, we do observe that increased household input use is correlated with crop income growth. It is possible that these findings can be explained by the fact that the expected returns from input use remained negative for many farmers that chose not to use inputs (such as found in Ghana in Rosenzweig and Udry 2016). Indeed, the widespread presence of low-quality inputs reduces the returns to many inputs available on the market (Bold et al. 2015).

It is also possible that barriers to the adoption of inputs reduce their uptake. Bandiera et al. (2015) document that providing extension and access to credit to households increases their adoption of improved inputs, which suggests that lack of knowledge and credit constraints limit the degree to which households can take advantage of a favorable environment for investment. Regardless of the cause, the limited modernization of agricultural production observed during this period highlights that 3