Fiscal Capacity under Devolution: Households, Livestock and Fishing Activities in Kenyas’ Governments

Abstract

Decentralized revenue collection performance is shaped by geographical, technological, and institutional conditions. In Kenya, the 2010 constitution established 47 county governments with constitutionally guaranteed intergovernmental transfers and devolved revenue collection authority. However, these county governments have persistently under-performed in mobilizing own source revenue (OSR) relative to their estimated potential. This study, therefore, examines the relationship between OSR and household scale, livestock-related economic activity and fishing using cross-sectional data from the 2019 Kenya population and housing census and the commission on revenue allocation (CRA). The analysis employs an Ordinary Least Squares (OLS) regression model and diagnostic tests are conducted to verify compliance with classical linear regression assumptions. Household scale exhibits a positive and highly significant association with OSR. Livestock abundance is positively associated with revenue generation whereas reliance on fishing is negatively related to OSR performance. The study contributes to the literature on fiscal decentralization by providing sub-national empirical evidence linking demographic scale and agricultural sector composition to local revenue mobilization capacity. The results underscore the need for context-specific revenue policies and differentiated intergovernmental fiscal support, particularly for counties with limited economic bases, to strengthen fiscal sustainability and equity within Kenya’s devolved governance framework.