EFFECT OF POVERTY ON HEALTHCARE UTILIZATION, CHOICE OF HEALTHCARE PROVIDERS AND HEALTH STATUS IN KENYA PETER KATUNDU MUSYOKA K96/CTY/24439/2013 A THESIS SUBMITTED TO THE SCHOOL OF ECONOMICS IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DOCTOR OF PHILOSOPHY DEGREE IN ECONOMICS OF KENYATTA UNIVERSITY APRIL, 2019 DECLARATION This thesis is my original work and has not been presented for a degree in any other University or any other award. Signature……………………………………..Date……………………………… Peter Katundu Musyoka B.Ed (Hons), University of Nairobi M.A (Economics), University of Malawi Reg. No. K96/CTY/24439/2013 We confirm that this thesis was developed by the candidate under our supervision as University Supervisors Signature……………………………………..Date……………………………… Dr. Julius Korir Department of Economic Theory Kenyatta University Nairobi, Kenya. Signature……………………………………..Date……………………………… Dr. Jacob Omolo Department of Applied Economics Kenyatta University Nairobi, Kenya Signature……………………………………..Date……………………………… Dr. Charles C. Nzai Department of Applied Economics Kenyatta University Nairobi, Kenya ii DEDICATION To my wife Caroline Katundu and our children Gabriel Mutuku, Grace Ndinda and Geoffrey Musyoka. iii ACKNOWLEDGEMENTS I am very grateful and thankful to God for according me good state of health and energy during the entire PhD study period. Generous financial assistance from Kenyatta University during the PhD study period is acknowledged and highly appreciated. I am grateful for invaluable comments and guidance received from my supervisors Dr. Julius Korir, Dr. Jacob Omolo and Dr. Charles Nzai. I would like also to recognize and appreciate all the lecturers from School of Economics, Kenyatta University, who taught me in the coursework component of this PhD study. I would also like to thank other members of staff whose advice and word of encouragement impacted this work greatly. Special thanks go to Dr. Diana Ngui for her comments throughout the research portion of this PhD study. I would also like to appreciate resource persons especially Dr. James Ciera and Dr. Maurice Mutisya who played various roles during writing of this thesis. I would also like to appreciate my classmates with whom we held discussions and encouraged each other during our PhD studies. I am also grateful to all participants at the School of Economics Postgraduate Seminar for their comments during presentation of this PhD work. Last but not least, I am greatly indebted to my family members for their prayers, support and understanding during the entire period of my PhD studies. In a special way I would like to acknowledge and appreciate my uncle, Mr. Stephen Muthiani for support and encouragement throughout the study period. My wife Caroline and our children Gabriel, Grace and Geoffrey, I have no enough words to say thank you. I appreciate everything you did for me during my studies. I also appreciate my parents, Mr. and Mrs. A. Musyoka Katundu, brothers and sisters for the support and encouragement during my studies. iv TABLE OF CONTENTS DECLARATION .................................................................................................... ii DEDICATION ....................................................................................................... iii ACKNOWLEDGEMENTS ................................................................................... iv TABLE OF CONTENTS .........................................................................................v LIST OF TABLES ................................................................................................ vii ABBREVIATIONS AND ACRONYMS ............................................................ viii OPERATIONAL DEFINITION OF TERMS .........................................................x ABSTRACT ........................................................................................................... xi CHAPTER ONE: INTRODUCTION ......................................................................1 1.1 Background ...............................................................................................1 1.1.1 Policy Landscape Relating to Health and Poverty Linkages ....................1 1.1.2 Trends in Poverty and Poverty Reduction Strategies in Kenya ..............11 1.1.3 Health Policies and Health Indicators in Kenya......................................23 1.1.4 Health Care Utilization in Kenya ............................................................36 1.2 Statement of the problem ........................................................................38 1.3 Research questions ..................................................................................41 1.4 Objectives of the Study ...........................................................................41 1.5 Significance of the Study ........................................................................42 1.6 Scope of the Study...................................................................................42 1.7 Organization of the Study .......................................................................43 CHAPTER TWO: LITERATURE REVIEW ........................................................44 2.1 Theoretical Literature ..............................................................................44 2.1.1 Neo-materialist Hypothesis .....................................................................44 2.1.2 Behavioral Model of Health Care Utilization .........................................45 2.1.3 Grossman‟s Model of Human Capital .....................................................48 2.1.4 Acton‟s Utility Maximization Model of Health Care Demand ...............51 2.2 Empirical Literature ................................................................................54 2.3 Overview of Literature ............................................................................81 CHAPTER THREE: METHODOLOGY ..............................................................86 3.1 Research Design ......................................................................................86 3.2 Theoretical Framework ...........................................................................86 3.2.1 A Theoretical Framework for Production of Health ...............................86 3.2.2 A Theoretical Framework for Choice of Healthcare Provider ................89 3.3 Model Specification ................................................................................92 3.3.1 Effect of poverty on health care utilization in Kenya .............................92 3.3.2 Effect of poverty on choice of health care providers in Kenya ...............96 3.3.3 Effect of poverty on health status in Kenya ..........................................102 3.4 Definition and Measurement of Variables ............................................106 3.5 Diagnostic Tests ....................................................................................109 3.6 Data type and source .............................................................................109 3.7 Data Analysis ........................................................................................110 CHAPTER FOUR: EMPIRICAL FINDINGS AND DISCUSSION ..................112 4.1 Descriptive Statistics .............................................................................112 4.2 Empirical Findings ................................................................................120 4.2.1 Effect of poverty on health care utilization in Kenya ...........................120 v 4.2.2 Effect of poverty on choice of health care providers in Kenya .............137 4.2.3 Effect of poverty on health status in Kenya ..........................................150 CHAPTER FIVE: SUMMARY, CONCLUSIONS AND POLICY IMPLICATIONS .................................................................................................171 5.1 Summary ...............................................................................................171 5.2 Conclusions ...........................................................................................174 5.3 Policy Implications ................................................................................174 5.4 Contribution to knowledge ....................................................................179 5.5 Areas for further research ......................................................................180 REFERENCES ....................................................................................................181 Appendix ..............................................................................................................191 vi LIST OF TABLES Table 1.1: Prevalence of Absolute Poverty Overtime in Kenya ...............................16 Table 1.2: Selected Health Targets as Per NHSSP I (1999-2004) ............................27 Table 1.3: Kenya‟s Key Health Indicators and Global Development Targets for Selected Years ...........................................................................................................34 Table 1.4: Comparison of Kenya‟s Key Health Indicators with Selected Regions ..35 Table 1.5: Proportion of People Reporting Illness and Total Number of Outpatient Visits and Utilization Rates (2003-2013) .................................................................37 Table 4.1: Descriptive Statistics for Continuous and Count Variables ..................112 Table 4.2: Summary Statistics for Discrete/Categorical Variables ........................115 Table 4.3: Poisson, NBRM and ZIP Models Selection