Department of Agricultural, Food, and Resource Economics Food Security Group

IDWP 90. William J. Burke, T.S. Jayne, H. Ade Freeman, and P. Kristjanson. 2007. Factors Associated with Farm Households’ Movement Into and Out of Poverty in Kenya: The Rising Importance of Livestock

EXECUTIVE SUMMARY:
This study explores the dynamics of poverty in Kenya. The study specifically examines how
initial conditions, household decisions, and other factors that may change over time affect
poverty. Dynamic relationships are identified between behavioral variables, exogenous shocks
at one point in time, and indicators of household welfare in subsequent years.

Most quantitative studies characterizing rural poverty have been based on analysis of crosssectional
household survey data, which cannot provide insights into how or why households
move into or out of poverty over time. In particular, it is difficult to identify specific behavioral
decisions at one point in time that alter the path of households’ living standards over the future,
which is arguably critical for designing effective poverty alleviation strategies.

The study uses longitudinal data collected from 1,324 households which participated in three
nationwide surveys conducted over seven years, in 1997, 2000, and 2004, to identify salient
household-level and community-level correlates of poverty in rural Kenya. Next, dynamic
relationships are identified between time-invariant initial conditions, lagged household resource
allocation, technology adoption decisions, and current income and wealth outcomes. Last, the
paper draws implications for designing policies and programs for alleviating rural poverty and
promoting income growth.

After ranking households into terciles (or thirds) in each year, it is shown that the majority of
households (57%) remained at the same relative poverty tercile in 2004 as that in which they
began in 1997. Twenty-two percent of households made some progress in moving out of poverty,
while 21% experienced a decline in welfare. The distribution of wealth across these households
is highly unequal, with the value of assets owned by the 217 poorest households being only 13%
of the value of the median household. The 249 households consistently in the top asset tercile
had over eight times that of the median household.

Some of the factors helping to explain variation in asset-poverty levels across rural households in
Kenya include the age and education of the household head, whether someone in the family has a
formal job, land ownership, family size, and the distance to a tarmac road. While geographic
location is an important factor, the differences in wealth among households in a given village
tend to be greater than differences in mean household wealth across villages. Even within the
same villages, rural households are very heterogeneous.

The findings from this study show that access to land continues to be a major determinant of
rural household welfare. The consistently non-poor group cultivates three to four times more
land on average than the chronically poor. Households that had made positive progress out of
poverty had significantly increased the amount of land they controlled, from an average of three
acres in 1997 to five acres in 2004. The direction of causality is not clear.

More types of crops were grown in 2004 than in 1997 by poorer as well as non-poor households.
An increasing diversity is seen in off-farm income sources by the poorest households,
particularly into lower entry-barrier, higher risk income generating activities. This finding lends
support to earlier theories that the poor, or those suffering a negative shock to their incomes may
rely on such activities as temporary poverty alleviation. This study shows, in a dynamic context,
that such short term solutions rarely lead to long term growth, and may in fact be poverty traps.

There has also been an increase in the types of livestock sold, particularly by non-poor
households, who sell four times as many types of livestock and livestock products than do the
poor. The importance of livestock production and marketing to the welfare of successful
households holds irrespective of farm size. This seems to be particularly true for the dairy
market. This study shows that the consistently wealthy are more likely to be producing, that the
production is more commercialized, and that it is a greater share of total income compared to
other poverty groups. Households whose wealth and asset holdings are increasing over the
seven-year period are more likely to be intensifying their animal-based income-earning activities
than other households.

The findings from this study have a number of implications for the design of strategies, policies,
and instruments for reducing poverty and supporting agricultural growth in rural areas of Africa.
First, the analysis demonstrates that the primary sources of variations in asset-poverty are at the
household level, where asset holdings define a household’s capability to pursue different
livelihood activities that generate income. Sustainable poverty reduction needs to be built on a
solid understanding of household asset positions and the contexts where assets are used as the
basis for identifying livelihood strategies that lead to pathways out of poverty.

Second, greater support for poor households to enter and/or expand their participation in dairy
and other animal product markets may provide a dynamic source of poverty reduction and
growth.

Third, given the importance of land in household asset portfolios, agricultural growth and
poverty reduction strategies need to take into account the realities of declining farm sizes and
inequalities in access to land. The practical implication of declining available cultivated land per
agricultural person is that raising labor and crop productivity on small farms under any plausible
productivity growth scenarios is necessary, but not singularly sufficient to drive rural economic
growth. Poverty reduction and growth strategies need to recognize the multi-dimensionality of
rural livelihoods and the importance of farm-nonfarm linkages in facilitating rural growth. Policy
priority, therefore, should be given to providing an enabling environment for commercial
activities that support competitiveness of household producers, lower level of formal and
informal taxes, and increased investment in public goods, such as agricultural research,
extension, and infrastructure. No single approach taken alone is likely to alleviate poverty.