Abstract

We explore how spatial interaction affects the strategic use of municipal income when deciding between 1) an optimal long-run expenditure strategy versus 2) using the current income to finance current activities, a phenomenon known as the permanent income hypothesis. Even when this hypothesis is grounded in temporal logic, insufficient attention has been given to the impact of spatial dependence on this type of budget decision. Therefore, we present two reasons why spatial interaction adds new insight to this discussion.

Despite its low contribution to global greenhouse gas (GHG) emissions, Kenya bears a disproportionate burden of climate change impacts, which have been exacerbated by COVID-19. These impacts are disrupting the country’s economic performance, as seen in sectors such as agriculture, tourism, forestry, water, and transport. In many cases, the catastrophic effects of climate change are most disruptive to vulnerable groups, such as the poor, women, and children.