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Working paper 39-Pathways into and out of Poverty: A Study of Rural Household Wealth Dynamics in Kenya

Author(s):  Milu Muyanga, T.S. Jayne, and William J. Burke


Introduction

For the past half-century, African governments and development agencies have experimented with a series of alternative approaches for addressing rural poverty, each giving way to a new paradigm as the persistence of poverty created disillusionment with prevailing approaches.1 In 2005, more than 40 percent of sub-Saharan Africa’s population was estimated to be below the poverty line, and this situation appears to have improved only marginally over the past decade (World Bank, 2006). Despite successive years of five percent growth in real gross domestic product (GDP) in sub-Saharan Africa in 2004, 2005, 2006, and 2007, rural poverty appears to be declining only marginally, and is even increasing in some countries.

Yet some smallholder farm households have successfully climbed out of poverty, and providing an opportunity to learn about the economic pathways that might enable other rural smallholders to do so. If researchers and policy makers knew more about the factors enabling some households to have risen out of poverty, it might be possible to replicate these factors more broadly through poverty reduction strategies. Conversely, some households that were once well above the poverty line have now descended into poverty.

Such cases may also provide insights about the design of programs and policies to address rural poverty. Additional insights may be possible by identifying “successful” farmers who have consistently outperformed others in their communities and the reasons for it. This study is motivated by the need to better understand the factors enabling rural households in sub-Saharan Africa to escape from poverty and remain nonpoor, as well as those that may push relatively wealthy households into poverty.

This study examines the factors associated with dramatic changes in farm household asset wealth over a 10-year period in Kenya. The study makes use of household panel survey data collected in 1997, 2000, 2004 and 2007 to identify three types of smallholder farm households:

(i) those experiencing a major improvement in asset wealth;

(ii) those experiencing a major decline in wealth leading to living standards below the poverty line; and

(iii) “successful” smallholder farmers consistently in the top quartile of asset wealth throughout the 10-year period.

Seventy-eight households were revisited in 2008 to conduct retrospective in-depth “life history” surveys. The sample was confined to smallholder farming households controlling less than 4 hectares of land, given than 95 percent of Kenya’ smallholder population is also in this situation. The study thus omits cases of poverty reduction arising from obtaining access to significant new land, a situation that is infeasible for the vast majority of rural African households.

The study measures poverty and wealth in terms of households’ assets. While most studies to date have tended to measure household welfare in terms of income or consumption, arguments have been raised in support of households’ value of assets as a more appropriate measure of welfare. Asset holdings are considered to be a more stable indicator of current welfare and future vulnerability especially in regions where households rely greatly on their physical assets for their livelihoods (Krishna, 2004; Barrett and Swallow, 2006; Carter and Barrett, 2006; Cooper, 2008).

In environments where credit and insurance markets are not available, households have been found to rely on their assets to smooth consumption and to ensure survival through repeated shocks. Thus, assets act as a ‘safety-net’ when households’ income streams are interrupted (Carter and Barrett, 2006 and Zeller and Sharma, 2000). For these reasons, the study of household asset dynamics -- how households build up their asset base and why asset bases get depleted -- is likely to be important in developing effective poverty reduction strategies.

The study is organized as follows: Section 2 examines poverty trends in Kenya over the past 20 years based on official government statistics. Section 3 describes the data and sampling methods used in this study. Section 4 reviews the literature on the determinants of poverty in rural Africa based on prior studies and reports descriptive trends and factors correlated with asset wealth and poverty patterns in the nationwide panel sample.

Section 5 presents the estimation strategy used to derive statistical inferences about the importance of these various factors associated with changes in poverty status over time. Section 6 reports the main findings, while Section 7 discusses the implications for the rural investments, programs, and policies designed to reduce rural poverty.

Pathways into and out of Poverty: A Study of Rural Household Wealth Dynamics in Kenya

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