CW-Department of Applied Economics

Permanent URI for this collection

https://repository.ku.ac.ke/handle/123456789/3233

Browse

Browsing CW-Department of Applied Economics by Issue Date

Filter results by year or month
Now showing 1 - 3 of 3
  • Thumbnail Image
    Item
    Determinants of value added tax revenue in Kenya
    (2011-03) Wawire, N. H. W.
    Past studies that have been undertaken on the responsiveness of tax revenues to changes in GDP in Kenya have found a positive relationship between tax revenues and GDP. However, the studies omit some key determinants of tax revenues, such as the nature of the tax system and institutional, demographic and structural features of the economy. Due to this omission, the estimated income elasticities of Value Added (VAT) revenues are unreliable for planning purposes, a situation that might be responsible for the recurring budget deficits. The specific objectives of this study were to establish the determinants of VAT revenue and assess the response of VAT structure to changes in the in its tax bases. The study is important because its results can be used to design pro-growth tax policies and implement tax changes that are equity enhancing. The paper uses Paul Samuelson's (1955) fundamental general equilibrium analysis of the public sector to derive its main results. In the framework, the demand function for the public good was derived from a constrained model of utility-maximization. In the same vein, tax revenues were taken as functions of household incomes, which paved the way for the estimation of Engel curves for public goods. The study finds that growth elasticities for VAT are all greater than one. The estimation results show that total GDP elasticity of VAT revenues is less than the elasticities with respect to monetary GDP, suggesting the existence of an underground economy in Kenya over the period of analysis. It is found that VAT revenues respond with substantial lags to changes in its determinants and that VAT revenues are sensitive to unusual circumstances. The study concludes that Kenya’s VAT revenue is very responsive to changes in their determinants especially international trade. There is therefore the challenge of creating a stable VAT system so that tax revenues can increase rapidly as the economy grows.
  • Thumbnail Image
    Item
    Determinants of Informal Sector Performance in the Rural Areas of Kenya: Evidence from Makueni County
    (2014) Dianah, M. Ngui; Joseph, M. Muniu; Wawire, N. H. W.
    The general objective of this paper was to investigate the factors that determine the performance of woodwork and metalwork enterprises in the rural parts of Makueni County in Kenya. The results showed that working capital. licensing. competition and the level of education were statistically significant in determination of profits. Based on the findings. it is recommended that the government and other stakeholders should provide both financial and non-financial services at affordable rates to the small business operators and entrepreneurs. Loans in form of money or kind should be made available through relevant lending institutions to supplement the working capital. eminars and conferences should be held to create awareness to the entrepreneurs of the various incentives and credit facilities provided by the government and other stakeholders. To achieve diversification and reduce the level of competition, the government should advice entrepreneurs on alternative business ventures. The government should also allocate land to the entrepreneurs and establish business parks
  • Thumbnail Image
    Item
    Effect of public debt on private investment and economic growth in Kenya
    (Kenyatta University, 2024-05) Gathu, Winfred Wanjiku
    The Kenya Vision 2030 set ambitious goals for the nation’s political, social and economic development. Specifically, the economic component aspires to attain a 10% annual economic growth rate. Achieving this goal heavily hinges on investments, and Kenya currently leans on taxes and public debt to fund investments and promote economic growth. An excessive dependence on public debt carries potential drawbacks, including the risk of crowding out private investments and obstructing long-term economic growth. The objective of this research was to examine the impact of public debt on Kenya’s private investments and economic growth. Many previous studies have delved extensively on the effect of external debt on private investments and economic growth. This study sought to examine the effect of public debt, with a primary focus on the effect of domestic debt on private investments and economic growth. Time series data spanning from 2000 to 2021 were utilized to analyse the causal relationships among public debt, economic growth, and private investments. A Vector Error Correction Model (VECM) was employed to estimate the models, because the diagnostic tests show presence of a long run relationship. The model provided insights into the dynamics between public debt, economic growth, and private investments in Kenya. The findings revealed a significant negative effect of domestic debt on private investment and foreign debt on private investment. The analysis also considered other variables such as income tax yield, and total money supply which showed significant associations with private investment. Additionally, the findings revealed a significant negative effect of domestic and foreign debts on economic growth. Other variables such as capital and labour also demonstrated significant associations with economic growth. The study concluded that continuous monitoring and evaluation of debt management policies are crucial to ensure the long-term fiscal sustainability of the nation and foster an enabling environment for private investment. The study recommends that policymakers implement strategies to enhance domestic capital formation and improve infrastructure and human capital. These measures can help reduce the reliance on public debt as a financing mechanism and promote sustainable economic growth in Kenya.