Socio-economic Effects of Covid-19 on Households Expenditure in the Urban Areas of Kenya.

Abstract

Background: Coronavirus disease 2019 (COVID-19) presents itself as not only a health crisis but also an economic crisis. This implies that while the primary goal is to contain the spread of the virus, tracking urban household’s expenditures and coping mechanisms is equally important as it depicts their economic wellbeing. This is because urban households have been disproportionately disadvantaged in terms of infections as well as the economic burden of the pandemic. Objective: The objectives of the study were: to determine the expenditure patterns of urban households in Kenya during the COVID-19 period; to assess the socio-economic effects of Coronavirus disease on the expenditure of households in the urban areas of Kenya and; to determine households coping mechanisms to meet and maintain their expenditures. Method: The study used a high frequency phone survey panel data collected in four waves by the World Bank, University of California, Berkeley and Kenya National Bureau of Statistics (KNBS) to assess the socio-economic effects of COVID-19 on households expenditure in the urban areas of Kenya. The panel data was analyzed using random effects (RE) regression model, given that the Hauseman test showed that RE model was the most suitable model for analysis for our study. Results: Data analysis showed that there is a positive correlation between the socio-economic effects of COVID-19 and urban households’ one-week expenditures. This implies that as household heads lost their income, lost their jobs or closed their businesses due to COVID-19, there was a corresponding decrease in their one-week household expenditures. Household heads who lost their jobs specifically, decreased their household one-week expenditures by 25.1%. In addition, household heads who had higher education levels spent 25.5% more than those with no education or had lower education qualifications. Implying that a higher education level enables one to have more income that enables them to spend more. Similarly, as household size increased there was an increase in households-one week expenditure by 4.5% across all the income groups. On the other hand, the older the household head was, the lesser the expenses they incurred in a week by 0.4%. In addition, as prices of food and non-food items increased, households reduced their one-week expenditures. Expenditure patterns of households of all the income groups was the same across the four waves of data collection. The difference only came in terms of the magnitude of the decrease or increase in expenditure. This shows that consumers have the same expenditure behaviour when faced with a pandemic regardless of the income group they belong to. Expenditure on food and masks respectively were the key contributors to the household’s one-week expenditure for all income groups. Reduction in food consumption was the main coping mechanism adopted by households at 42.5% followed by a reduction in non-food consumption at 34.8%. Conclusion: The socio-economic effects of COVID-19 has pushed some households into adopting coping mechanisms such as reduction of food consumption in order to meet their expenditures on items such as masks which are mandatory for one to have. Such coping mechanisms exposes these households to poor nutrition, which has implications on their health. In addition, it regresses the country’s efforts in reducing/eliminating food insecurity. Some of the coping mechanisms adopted to meet or maintain households expenses might be short term but may have long-term negative consequences. Therefore, there is need for the government to provide financial protection through the provision of cash transfers and other safety nets to the most vulnerable and those with the greatest need in order to cushion them from the socio-economic effects of the pandemic.