Poverty Reduction through Growth, Redistribution and Social Inclusion in Times of COVID-19: Kenyan Evidence on the Underlying Mechanisms

Abstract

Abstract The paper looks at the nexus between growth, poverty, inequality and redistribution in Africa, using Kenya as a case study. The existing literature shows a strong causal link from growth to poverty reduction. This link is the basis for the pro-poor poverty reduction strategy. There is evidence from the AERC studies that, poverty reduction in a given period is associated with higher growth rates in successive periods that are inequality-reducing and conceptually long lasting. This virtuous spiral of poverty reduction, higher growth and less inequality over time, is the basis for the pro-growth poverty reduction strategy that has recently been emphasized in the literature ( Thorbecke and Ouyang, 2022). The two poverty reduction strategies, a pro-poor strategy and a pro-growth poverty reduction one, complement each other, sustaining household escapes from poverty over time. The paper provides evidence from Kenya showing that human capital formation is the key mechanism underlying the virtuous spiral of lower poverty, higher growth and less inequality as the economy progresses through time. A perspective on robustness of the virtuous spiral in the context of COVID-19 and other pandemics is offered in the concluding section of the paper.