Public Agricultural Research and Development Expenditures and Economic Growth in Kenya
Maluku, Stephen Mwongela
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Research and Development (R&D) plays a fundamental role in economic growth in that it provides impetus for new knowledge and technologies which contributes to growth of the economy. Existing literature identifies knowledge expansion prompted by expenditures on R&D as a key propellant of economic growth. The literature provides evidence that R&D investments translates to discoveries which transforms resources into products, processes and services and thus leads to growth of the economy. Inspired by the desire to grow the economy, the public and the private sector in Kenya has overtime allocated resources to finance public agricultural R&D. In the 1980s, the expenditures varied significantly ranging from between 2.3 and 3.5 billion shillings which improved in the 1990s to range at between 3.5 and 4.1 billion shillings. In the 2000s, agricultural R&D expenditures fluctuated at between 3.9 and 4.4 billion shillings. The study sought to determine whether the expenditures on public agricultural R&D impact on GDP growth in Kenya. The study's guiding question was, does investments on public agricultural R&D impact on GDP growth in Kenya? The study used a causal research design and published annual data on public agricultural R&D intensity and GDP growth for 31 years between 1980 and 2010. Diagnostic unit root tests, co integration tests, Error Correction Models (ECMs) estimation and an advanced Granger causality test within an ECM were conducted in an effort to establish whether public expenditures on agricultural R&D impact on GDP growth in Kenya. The co integration test results and the ECMs estimation results indicated that public agricultural R&D intensity and GDP growth have a long run relationship. A Wald F test on the ECMs showed lack of short run causal effects between the variables. The estimated coefficients in both ECMs established a long run unidirectional causality in that public agricultural R&D intensity causes GDP growth and not vice versa.