Trends in rural incomes, poverty, and inequality are analyzed using Tegemeo Institute’s four
period panel data set spanning 10 years, 1997 to 2007. Households are classified into five
groups by their income and poverty paths over the period, providing substantial insight into
the heterogeneity of the rural population and the drivers of these dynamic income paths. We
find that poverty has fallen substantially and broadly across the country, with those exiting
poverty exceeding those falling into poverty by a factor of nearly three. Inequality was
analyzed based on income and various assets; it too has fallen substantially and broadly, with
every region seeing reduced income inequality and most seeing more equal distributions of
land and agricultural assets. Reduced inequality is a key reason that poverty fell in the
country even as real average per capita incomes also fell over the period; incomes for the
richest 20% fell while those for the bottom 30% rose. Key drivers reducing the likelihood of
ever being poor include having more than a primary education, cultivating more land and
applying fertilizer on it, and having off-farm income, especially salaries.