Economic Disparities in Colonial Kenya: Income Inequality and Wage Differentiation

In my dissertation, I investigate colonial-era economic disparities in Kenya and seek to answer the question of how unequal Kenyan colonial society was and what factors drove these inequalities in four interrelated papers. This investigation commences with an economy-wide analysis, which is then progressively narrowed down to different sectors, starting with the highly unequal wage sector. After this, the focus shifts to the inequalities ingrained in public-sector employment and entrepreneurial activities in the private sector. While the colonial racial disparities were driving the economy-wide inequalities, the breakdown of the economy into different sectors allows a more fine-grained analysis of inequalities within the African labour force. 

The first paper, which is co-authored with Maria Fibaek, reconstructs the incomes and population numbers of Europeans, Asians, and Africans utilising the social tables method, which allows estimation of historical economic inequality in a setting where microdata on incomes is lacking. Based on grouped income data originating from a variety of colonial sources, the study breaks down the colonial society along the dimensions of race and sector but, most importantly, along the dimensions of skill, gender, geographical location, occupation, and the size of the farm’s acreage. The new archival evidence and the thorough breakdown of both the top and bottom groups in the paper pave the way for explaining the drivers of income inequalities and broadening the previous accounts of dualistic economic structures in Kenya.

The paper finds initially relatively low but gradually increasing income inequality throughout the colonial period when measured by Gini coefficients. However, measures such as the Inequality Extraction Ratio show that much of the potential inequality was transformed into actual inequality, making Kenya a highly unequal colony. The role of coercion and political factors are evaluated through careful historical contextualisation, while the paper also notes the non-linear nature of the evolution of colonial policies, which influenced the economic outcomes of different societal groups. Yet, the institutions perpetuating racial inequalities only provide a piece of the inequality puzzle, as the restrictions and opportunities arising from colonial rule had differing effects on inequalities among Africans. 

The second paper moves on to provide a closer investigation of drivers of income inequality in one of the most unequal sectors – the formal wage sector. Inequalities in the colonial wage sector have not been previously investigated in detail, and further empirical evidence and comparison with other economies of sub-Saharan Africa would help disentangle the theoretical basis of the drivers of inequalities further. The paper contributes to the inequality literature by addressing sector-specific trends and by combining the overview of real wage trends and skill premiums to investigate the drivers of wage sector inequality over time.

The third paper contributes to understanding the growing importance of the public sector, which in Kenya had colonial roots. It provides carefully construed archival data on the structure of the public sector with a unique focus on the African labour force. Exploring the early evolution of the public sector and showcasing the formation of the public sector wage premium illuminates the challenges of applying the current theoretical understanding of public sector labour markets to a colonial setting. It provides an essential understanding of how the changing structure and maturing of the colonial state and the different (or lacking) development objectives affected the employment, remuneration, and other opportunities for the advancement of African public servants as opposed to the private sector actors. 

Finally, investigating a group that has received little attention—the African entrepreneurial class—further illuminates the impact of government policies on African opportunities and resulting inequalities. The fourth paper contributes to the still relatively scant literature on historical African entrepreneurship by investigating different forms of formal sector entrepreneurial activities. It brings forth how colonial institutional constraints on some activities and the encouragement of others guided the economic activity of African entrepreneurs. This, for example, resulted in the proliferation of African cooperative societies, which have received less attention in the literature. 

In addressing the overarching research question posed in the beginning, the dissertation makes a significant empirical contribution by collecting original quantitative and qualitative archival data from the Kenya National Archives and the archives and libraries in the UK. This not only refines our knowledge about the various income and social classes in colonial Kenya but, overall, provides a more detailed account of inequalities, restrictions, and opportunities in the different sectors of colonial society. The data collection effort on behalf of myself, Maria Fibaek (co-author paper 1), and Ellen Hillbom can, in turn, assist future research concerned with comparative or methodological investigations of historical inequality trends in sub-Saharan Africa.