Poverty remains among the major challenges facing the world today. Although world
poverty has generally fallen in the last 40 years, progress in Sub-Saharan Africa (SSA)
has been slow and uneven. The number of people reported as living on less than a dollar a
day (the internationally agreed definition of absolute poverty) has doubled over the past
20 years (World Bank, 2004a). This has left many questions as to the best strategies that
should be used to deal with the problem, spurring numerous research interests and
massive donor funds to be used. The fight against poverty however remains an elusive
goal.
In Kenya, high incidence and depths of poverty coupled with stagnating or
declining income growth are the two major challenges facing the country today. Close to
46 percent of the total population and nearly half of the rural population live below the
poverty line (Republic of Kenya, 2007) with meager incomes incapable of sustaining any
meaningful livelihood. Even worse, poverty rates in some regions have been on the
increase since the second half of the 1990s. Why? What are the alternative pathways out
of poverty, and where should the limited resources be allocated? The answer to this
question lies in understanding the causes of poverty and how policy can be used to break
the cycle.
Household incomes are an important measure of a household’s economic well-
being and are key to any poverty reduction strategy. A household’s total income, together
with other known welfare measures such as consumption, expenditure, assets, and
nutritional status, are some of the most commonly used metrics in analyzing poverty and
economic mobility (Baulch and Hoddinott, 2000).