The relationship between informal sector size and economic growth in Kenya
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Over the years, there has been an ongoing debate in the literature on the expansion of informal sector in Less Developed Countries. In Kenya, just like other less developed countries, informal sector commonly known as Jua Kali, has been playing a significant role in job creation. The sector also plays a key role in contribution to the country's Gross Domestic Product, provision of certain goods at cheap prices hence leading to household savings. The sector also provides competition to formal sector leading to cheap prices and innovativeness. In 1998, the informal sector contributed 18.4% of the country's GDP. The purpose of the research was to explore the contribution of Informal Sector size in economic growth in Kenya from 1980 to 2010. The scope of the study covered the period from when the government of Kenya officially came up with comprehensive policy framework on informal sector. Specifically, this study evaluated the relationship between the real Gross Domestic Product per capita growth and growth of informal sector employment in the country. To achieve this objective, the study used time series data obtained from government of Kenya official documents. The study showed that there is a relationship between the country's informal sector size and economic growth. The findings of the study would assist in policy formulation on the growth of the informal sector size.