Toward an Understanding of Household Vulnerability in Rural Kenya

Considerations of risk and vulnerability
are key to understanding the dynamics of poverty. This study
conceives vulnerability as expected poverty and illustrates
a methodology to empirically assess household vulnerability
using pseudo panel data derived from repeated cross sections
augmented with historical information on shocks. Application
of the methodology to data from rural Kenya shows that in
1994 rural households faced on average a 40 percent chance
of becoming poor in the future. Households in arid areas
that 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/goats appears ineffective in protecting
consumption against covariant 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.