Income Growth and Mobility of Rural Households in Kenya: Role of Education and Historical Patterns in Poverty Reduction

Various theories offer alternative predictions regarding the evolution of the
economic wellbeing of households over time. The theory of cumulative advantage posits
that the economic wellbeing of the initially better-off households becomes better while
that of the initially disadvantaged worsens (Fields et al., 2003a). This is based on the
premise that wealthier households are endowed with both physical and human capital
assets, whose further investment (presumably in high return activities) results in higher
incomes. However, at the lower end of the income distribution, cumulative disadvantage
seems to be at work whereby households without a ‘minimum level of human, physical
and social assets are confined to a life in poverty’ (Fields et al., 2003a pp 68). This is
related to the notion of poverty traps whereby some households suffer a successive run of
negative shocks that forces them into destitution.

An alternative theory is based on the notion of convergence of incomes towards
the average, thus enabling initially disadvantaged households to become better off and
vice versa. The convergence argument is based on the assumption that income shocks do
not persist and are not correlated over time. While the theory of cumulative advantage
implies targeting those who are economically disadvantaged so as to set them up on a
positive growth process, it may also be true that some important income shocks
especially for rural households who mainly rely on the farm may be independent, thus
permitting quick recovery. This kind of information would especially be insightful when
disaggregated at regional level in explaining why households in some regions remain
disadvantaged over time. Suffice it to say that both these dynamic processes do
potentially take place: cumulative advantage as a result of using these advantages¹ to
¹ access to various endowments, market and financial institutions

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