Determinants of rural income: The role of geography and institutions in Kenya

Abstract

We revisit the debate about the root causes of income divergence, and ask whether geographical variables or institutions are the main determinants of income. Complementing earlier cross-country work, we focus on the local level and seek to explain within-country income differences. Analyzing Kenyan household data, we find that certain geographical variables appear to be more important drivers of per capita income levels than local institutions. Once we control for geography, our measures of community-level institutions do not seem to explain within-Kenya differences in income.