The Urban-Rural Unemployment Gap in Kenya

Abstract

Open unemployment in Kenya is relatively high among urban residents compared to rural residents. This study examines urban-rural differences in the incidence of unemployment in Kenya. The study used cross sectional data from the Kenya Integrated Household Budget Survey 2005/06 to conduct econometric analysis of unemployment based on probit model. Further, using Fairlie (2003) decomposition technique, the study estimated the portion of the urban-rural unemployment gap due to differences in the regional distribution of observed individual and household characteristics and the portion due to differences in the returns (penalty) to observable characteristics. Separate probit results of urban and rural areas show age, gender, marital status, householdheadship and housing tenure to have negative and significant effects on the probability of unemployment. However, age, gender, marital status and household head have a stronger effect on the probability of unemployment in urban areas than in rural areas while housing tenure has a stronger effect on unemployment probability in rural areas than in urban areas. Household size and form four secondary education positively and significantly affect the probability of unemployment in urban areas. Additionally, the effect of secondary education and household size on the probability of unemployment is stronger in urban than in rural areas. Chronic illness, primary education and university education are observed to have mixed and insignificant effects on the probability of unemployment in urban and rural areas. Form six secondary education and college education are only significant determinants of unemployment in urban areas. However in both urban and rural areas they negatively affect unemployment probability. unemployed even after controlling for differences in individual and household characteristics.