How deep is the COVID-19 recession in low-income countries? Evidence from Kenya
This post, written by CEGA program associate Anya Marchenko, is part of a series of posts on how the coronavirus pandemic is affecting research processes.
All data shown below is available on the Kenya COVID Tracker. The tracker — set up by CEGA co-Faculty Director Ted Miguel and an international consortium of researchers and policymakers — is a unique “one-stop shop” for COVID-19 economic data in Kenya. Read our previous post about how this research team pivoted to conducting additional COVID-19 surveys and be on the lookout for future posts covering the other research teams’ initial findings.
In March, as Kenya shut down much of its economy due to COVID-19, the General Equilibrium (GE) research team was scrambling. They were poised to start surveying households in Western Kenya that had received large sums of cash 5 years before from the NGO GiveDirectly. The economists wanted to learn about any long-term effects of the cash. But now, as Kenya was shutting down, the team’s previous plans — both infeasible and inappropriate given the crisis — went out the window.
The GE team (comprised of CEGA Faculty Co-director Ted Miguel, Michael Walker, Dennis Egger, Johannes Haushofer, working jointly with Tilman Graff, Magdalena Larreboure, Layna Lowe, Carol Nekesa, and Andrew Wabwire) quickly realized it was important to understand how rural Kenyan communities were responding to the spread of the virus. Through the tireless work of Kenyan surveyors, who called 11,000 families (and 5,000 businesses) over 8 weeks (from early April to late May) via mobile phone, the team was able to measure how Kenyan families’ livelihoods and wellbeing have changed during the crisis.
The survey was a unique opportunity to hear from rural residents in a low-income country — people who normally fall through the cracks of media attention — and learn about how they were experiencing the pandemic.
In this blog post, we share the results of this surveying activity in Western Kenya, answering:
How has COVID-19 affected a rural, developing economy? How deep is the COVID-19 recession, and how is it changing over time? And most importantly, how are rural families living in poverty affected by the pandemic?
Effect #1: COVID-19 caused a precipitous drop in overall economic activity in Western Kenya
Early results show that sales by businesses gradually fall by 55% across all sectors until early May, compared to the pre-COVID average. Although we see a tentative rebound in recent weeks, sales remained 40% below their pre-pandemic value in mid-June.
Effect #2: When businesses close, that’s bad news for workers
Before the pandemic, roughly 2% of people would lose their jobs in a given month in this region. During the pandemic months of March and April, layoffs spike, with up to 8% losing their jobs (mostly due to businesses closing):
Effect #3: Families are earning less…
Shuttered businesses are affecting household income — we can see that wage earnings drop abruptly at the beginning of the lockdown.
Effect #4: …as well as buying less food
Over the first 8 weeks of the lockdown, spending on food drops by 45% compared to the pre-COVID average. The number of days children miss meals doubles.
Effect #5: Domestic violence increases
The number of women who report being forced to engage in sexual acts increases by 50%, while three times as many report being threatened by their partners. Reports of child beatings increase by 20%.
Effect #6: Families are working more, and saving less, to make up for the loss of income
Labor supply increases by 16% on average, and households spend a significant share of their assets each week to prop up their dropping incomes.
While contributions from NGO and government programs increase somewhat, these contributions are not enough to cover how much households lose, so total consumption still ends up falling by around 25%.
Conclusion
In May 2020 (the last few weeks of the survey), there is some evidence of economic recovery in this region of Kenya. For example, business revenue increases, with a corresponding increase in wage earnings — good news for workers trying to feed their families. However, without more time and more data, it is hard to say for sure how families and businesses will be faring.
This is why a second round of data collection is currently ongoing. In the second round, the research team will follow up with the same households, creating a unique panel data set to track the longer term effects of the pandemic. Stay tuned for these data updates on the Kenya COVID Tracker, which we hope can be used by the aid community and the Kenyan government to better understand any short-term recovery and broader economic impacts of the virus.
If you are a researcher who would like to include data on the Kenya COVID Tracker, please contact amarchenko@berkeley.edu.
