Kenya: How the 2019 Economics Nobel Relates to the Situation in Kenya

21 October 2019

Global poverty has been an elusive issue for a long time, with policies on the matter seemingly failing to adequately answer the question of how to end it.

And one of the primary reasons why the subject escapes the grasp of many policymakers and economists is the assumption that poverty is making too little money.

Derek Thompson, writing in The Atlantic, equates poverty to total inequality -- which is not merely income inequality or wealth inequality but the sum of the financial, psychological and cultural disadvantages that come with poverty.

These factors are difficult to grasp, so there will always be a misinterpretation of poverty.

There wouldn't be a point of defining poverty in Kenya or even provide statistics about it; most of you were either raised in poverty or are battling poverty in one way or another.

METHODOLOGY

This year's Nobel Prize in Economics, awarded on October 14, recognised the outstanding efforts of Michael Kremer, Esther Duflo and Abhijit Banerjee in solving the global poverty puzzle using an experimental approach that leverages on Randomised Controlled Trials (RCT).

Initially mainly applied in clinical medicine to investigate the efficiency of new drugs, the methodology is used to determine whether a given intervention works by granting access to it to limited participants and comparing the results with those without it.

Two of this year's laureates -- Kremer and Duflo -- have extensively conducted field experiments using RCT on Kenya in topics ranging from agriculture to education and health.

A classic example is their 2009 study on the use of fertilisers by farmers in western Kenya in collaboration with a local organisation, International Child Support Kenya.

The two found that demonstrating the benefits of using fertiliser would not induce farmers to adopt it since most of them waited until the start of the planting season to buy the input, at which point most didn't have the money and ended up foregoing its use.

SCREEN OUT

The study showed that offering farmers a discount to buy fertiliser soon after harvest and later deliver it for free increased uptake.

The results were published in "Nudging farmers to use fertiliser: Theory and experimental evidence in Kenya".

Another study by one of the laureates, Kremer, in the same region, "Targeting health subsidies through a non-price mechanism", sought to solve the policy conundrum on impacts of free provision of preventive health products. They include mosquito nets, deworming drugs and water treatment.

There has been a long debate that most of the products or technologies supplied for free end up being wasted, hence a need to screen out uninterested users.

Invariably, charging for these products that prevent diseases reduces their usage, especially by the majority poor.

In the study, the researcher used vouchers redeemable at a given time in allocating a highly-subsidised diluted chlorine water treatment solution.

It was found that the voucher mechanism screened out 88 per cent of those who would have accepted the product for free and fail to treat their water.

BETTER APPROACH

Other joint research projects by Kremer and Duflo, this time in the education sector, include "The political economy of education in Kenya" and "School governance, teacher incentives and pupil-teacher ratios: Experimental evidence from Kenyan primary schools".

The question of global poverty is very complicated, but this new approach of using randomised controlled trials in developmental economics helps to break it down into smaller easier questions that are easy to tackle.

Thanks to the fascinating work of the trio, the approach has become a standard method to developmental economists trying to alleviate poverty.

I'm thankful to the trio for their tremendous effort to inform policy decisions in my country, especially on sensitive topics such as free supply of preventive health products, provision of agricultural subsidies and improvement of the quality of education.

Mr Kinyua is a programmes officer at Eco-Ethics Kenya's Mombasa office. [email protected]

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