RP-School of Economics
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Browsing RP-School of Economics by Author "Etyang', Martin N."
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Item The Effect of The Size of the Informal Sector on Economic Growth in Kenya (1974 to 2016)(International Journal of Social Science and Economic Research, 2019) Opondo, Mary Awuor; Etyang', Martin N.; Okeri, Susan; Njuguna, AngelicaThe Kenyan economy is dual and predominantly informal. The size of the sector in the country has grown over time. The sector employed 19 percent of the total workforce in 1974 which increased to 84 percent in 2016. The country targets economic growth averaging 10 percent per annum, and a reduction in poverty rates to 28 percent of the total population by the year 2030. Efforts to develop the sector for economic growth, employment creation and poverty reduction can be traced to the period 1986, under the Sessional Paper No.2 of 1986 on Economic Management for Renewed Growth. The growth of the informal sector in the country has led to a marked increase in employment numbers, but not much is known about the effect on the other two objectives, which are economic growth and poverty reduction. Reports on the contribution of the sector to economic growth are largely conflicting with limited econometric studies. The study analyzed the relationship between the size of the informal sector and economic growth in Kenya. A growth accounting exercise was conducted using the standard Cobb-Douglas production function. From the study findings, the informal sector is the lowest contributor to output growth in the country. Given the size of the sector the study concludes that there is a need to target increased productivity in the informal sector for increased economic growth.