TITLE:
Does Fiscal Decentralization Reduce or Exacerbate Multidimensional Poverty? Evidence from Kenyan Subnational Governments
AUTHORS:
Ezekiel Atetwe, Rhenson Obora
KEYWORDS:
Fiscal Decentralization, Devolution, Multidimensional Poverty, Local Development and Governance, Counties, Kenya
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.14 No.3,
March
11,
2026
ABSTRACT: This paper empirically analyses whether there is any significant statistical relationship between fiscal decentralisation and multidimensional poverty in Kenya using FE and RE estimations for cross-county panel data from 2006-2019 published by government agencies, United Nation Development Programme (UNDP), Society for International Development and World Bank. The empirical estimations examine the effects of revenue decentralisation, vertical fiscal imbalances, intergovernmental transfers and expenditure decentralisation on multidimensional poverty-proxied alternatively by Headcount Poverty Index, Human Development Index (HDI) and Multidimensional Poverty Index (MPI). Our estimation results reveal that the impact of fiscal decentralisation on multidimensional poverty measures depends on the nature and extent of fiscal decentralisation. On the side of money-metric poverty measures, revenue decentralisation and vertical imbalances reduce poverty headcount at low levels below 61.31 per cent and 53.54 per cent respectively while intergovernmental transfers and expenditure decentralisation were found to increase poverty headcount at low levels below 9.92 per cent and 0.801 per cent respectively beyond which they would reduce poverty headcount. On the side of the non-money metric poverty, revenue decentralisation and vertical imbalance increase Multidimensional Poverty Index (MPI) at low levels below 51.94 per cent and 0.955 per cent respectively while intergovernmental transfers and expenditure decentralisation were found to reduce MPI at low levels below 9.07 per cent and 0.811 per cent respectively beyond which they would increase multidimensional poverty. Additionally, there are differences in the effects of fiscal decentralization and multidimensional poverty across regions and counties. Our results also show the major role played by the devolution reforms of 2013 in increasing the overall decentralisation that improved multidimensional poverty reduction through pro-poor expenditures.