Pathways into and out of poverty: a study of rural household wealth dynamics in Kenya

Abstract

Executive Summary: The recent availability of longitudinal survey data provides a new means to analyze the dynamics of household wealth accumulation and deterioration. This paper identifies the factors associated with smallholder farm households having ascended out of poverty or descended into poverty between 1997 and 2007. Using a nationwide balanced panel of 1,275 farm households in 22 districts in Kenya interviewed in 1997, 2000, 2004, and 2007, we find that a relatively small fraction of the sample experienced either an appreciable improvement or decline in their relative asset wealth over the 10-year period. Over 70% of the sampled farm households are in roughly the same wealth position as they were 10 years earlier, although more households experienced an increase in asset wealth than a decline. Evidence also points to a decline in poverty rates, which is consistent with Government of Kenya findings of declining national poverty rates over the same general period. For the 25% of households that did experience an appreciable change in asset wealth between 1997 and 2007, we revisited 84 of these households in 2008 with more detailed retrospective life history surveys to capture a wider range of factors influencing current household livelihoods. Households successfully accumulating assets and rising out of poverty (i) were more likely to have remained healthy and suffer no unexpected deaths during the decade prior to the start of the initial survey in 1997; (ii) were less adversely affected by mortality that did occur during the panel period compared to other households; (iii) were consistently headed by a male; (iv) received relatively more land from their parents at the time the household was formed; and (v) had parents who were relatively well-off and educated. Moreover, the ascenders were able to acquire more land, cultivate 70% more land, and increase their use of fertilizer over the 2000-2007 period, consistent with the overall agricultural and economy- wide growth in Kenya that occurred during the 2004-2007 period. Among households reporting a significant decline in asset wealth, roughly half experienced unexpected shocks, such as premature death and chronic illness. These households reported spending 22% of their annual incomes and 47% of their assets on medicines and caregiving. Households with declining asset trajectories were also more likely to have turned from male- to female-headed due to male mortality, have two or more wives in the household, poorly educated household heads, fathers of household heads who were relatively uneducated, and relatively little land and other assets inherited from parents. Small inheritances among the descenders can be traced to a smaller amount of land per number of sons of the household head’s father. The descenders also tended to lose land and animal assets over the panel period (in some cases due to disease and need to pay for medical expenses) in sharp contrast to the ascenders. Perhaps surprisingly, the descenders were more likely to use fertilizer, had higher fertilizer application rates per acre cultivated, and were more likely to receive agricultural credit than the ascender households. Consistently better-off households were more likely to: (i) have been male headed; (ii) have members with secondary and/or post-secondary educations; (iii) not be polygamous; and (iv) receive significantly more land and other assets at the time the household was formed. They were also less affected by mortality in the family. These consistently better-off households owned more land and applied more organic and inorganic fertilizer than either the ascenders or descenders. However, they were no more likely to receive agricultural credit or grow major cash crops than the descenders. These findings underscore the importance of staying healthy in households’ ability to accumulate productive assets and move out of poverty. Households’ agricultural performance and earnings over time is in many cases related to their lagged health status. The study also highlights the role of intergenerational wealth transfers. Poor households are able to transfer little to the next generation, which then makes it very difficult for them to climb out of poverty.