Towards an Understanding of Household Vulnerability in Rural Kenya

This study illustrates a methodology to empirically assess household vulnerability using pseudo panel data derived from repeated cross sections augmented with historical information on shocks. It conceives vulnerability as expected poverty. Application of the methodology to data from rural Kenya shows that rural households faced in 1994 on average a chance of 39% of becoming poor in the future. Households in arid areas, who experience large rainfall volatility, appear more vulnerable than those in non-arid areas, where malaria emerges as a key risk factor. Idiosyncratic shocks also cause non-negligible consumption volatility. Possession of cattle and sheep/goat appears ineffective in protecting consumption against covariate shocks, though sheep/goat help reduce the effect of idiosyncratic shocks, especially in arid zones. Of the policy instruments simulated, interventions directed at reducing the incidence of malaria, promoting adult literacy, and improving market accessibility hold most promise to reduce vulnerability.