Shocks and Household Welfare in Kenya

The threat of adverse effects of shocks on the welfare of Kenyan households is still a challenge in socio-economic development in the country. Among the sources of vulnerability to shocks is the livelihoods' reliance on agriculture, a sector that is highly prone to recurrent shocks. Vulnerability, especially among rural households is also due to physical isolation from the mainstream national economic activities. The shocks consequently lead to welfare reductions among households, indicating inadequacies in the existing risk management and coping strategies. In the absence of effective coping mechanisms, households cannot effectively smooth consumption, thus likely to experience fluctuations in consumption expenditures and food insecurity. Vulnerable households are also most likely to resort to ineffective coping mechanisms, such as selling of farmland a- a recourse likely to reduce the existing resource base, weaken resilience, and increase vulnerability of falling into deeper poverty. In order to address adverse effects of shocks on household welfare, this study assessed; first, the effect of farm income shocks on rural household welfare; secondly, the circumstances and household characteristics that predispose households to engage in distress sales of farmland; thirdly, the dynamism in household vulnerability to shocks by examining the association between the physical infrastructure development in the country and vulnerability to shocks; and finally, the relationship between livelihood diversification and household vulnerability to climate shocks. The study uses household level data contained in the Kenya Integrated Household Budget Surveys collected by the Kenya National Bureau of Statistics in 2005/06 and 2015/16. Results show that consumption spending was lower for rural households that reported farm income shocks compared to those that were not affected, differences were noted when households were disaggregated along agro-ecological zones and non-monetary measures of welfare produced similar results as monetary welfare measures. On the shocks and household characteristics leading to distress sales of farmland, results revealed that age of the household head, loss of both income and assets due to shocks, persistence of shocks and idiosyncrasy of shocks increased the probability of distress sales. In addition, existence of land markets and the acreage of land holdings increased the likelihood of distress sales of farmland. The predisposition for distress sales of farmland reduced for households whose heads had at least tertiary level of education and access to public services such as tarmacked roads. The number of livestock owned reduced the likelihood of distress sales of farmland. On the association between infrastructure growth and vulnerability to shocks, the results revealed that between 2005/06 and 2015/16, there was a reduction in household vulnerability to the general shocks with the reduction being higher for urban households; rural households' vulnerability to food shocks reduced more compared to urban households. Both rural and urban households increased the use of infrastructure-supported ex-post coping strategies such as savings and borrowing to respond to food-security shocks, with the adoption being higher by five percentage points among rural households. Finally, the study found that livelihood diversification had an inverse relationship with household vulnerability to climate shocks. Disaggregating the analysis along income classes and agro-ecological zones showed clearly that livelihood diversification has a role in mitigating the risk of climate shocks in rural Kenya. From the findings, policy suggestions are offered for enhancing the households' resilience to shocks.