PHD-School of Economics

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This collections contains bibliographic information and abstracts of PHD theses and dissertation in the School of Economics held in Kenyatta University Library

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Budget deficits and macroeconomic performance in Kenya (1963- 2007): An empirical analysis.
(Kenyatta University, 2009-09) Kosimbei, George Kipng'etich
Budget deficits have attracted a great deal of attention over the past two decades. They have been blamed for the assortment of ills that beset developing countries. The objectives of this study included: describing the budgeting process, explaining the sources of budget deficits, investigating the various methods used by the government of Kenya to finance budget deficits, analyzing the effects of budget deficits on selected macroeconomic variables and finally establishing the types of relationships that exists between budget deficits and selected macro variables. This study was underpinned on the Mundel- Fleming model. It applies Vector Auto regressions (VARs) together with annual time series data for the period 1963 to 2007 to evaluate the empirical effects of budget deficits on macroeconomic performance. The data used were selected macroeconomic variables that included; current account of the balance of payments, private consumption, private investment, money supply, Treasury bill rates, and real GDP. The study established that the budgeting process had loop holes which perpetrated budget deficits. Also, the sources of budget deficits include: level of economic development, low growth of revenue, instability of government revenues, government control over expenditures and the extent of government participation in the economy. The impulse response functions (IRFs) revealed that budget deficits have a significant effect on: private consumption, private investment, money supply (M3), treasury bills rate, current account and real GDP. These effects usually lasted for more than five years. Johansen co integration tests revealed a long run relationship between budget deficits and the selected macroeconomic variables. The overall ecommendation of this study is that the government of Kenya should formulate a firmer fiscal policy that would minimize budget deficits because they affect economic performance in Kenya.
The Determinants of Adoption of Information and Communication Technology by Small and Medium Enterprises within the Health Sector in Nairobi, Kenya
(Kenyatta University, 2010) Muathe, Stephen M. A.
Small and Medium Enterprises (SMEs) playa very important role in the economy in terms of wealth creation and provision of employment opportunities. However, competition from more established firms poses a great challenge to their existence. With the adoption of Information and Communication Technologies (lCTs), it was envisaged that SMEs would compete more effectively and efficiently in both domestic and international markets, but recent research portrays a gloomy picture about the adoption of ICT by SMEs. Most SMEs have failed to adopt ICT citing significant impediments. Since literature on ICT adoption by SMEs in Kenya is limited and inconsistent, this study examined the effects of various contextual factors such as individual factors, organizational factors, technological factors, and the external environment on the adoption of ICT by health-related SMEs in Kenya. A cross-sectional descriptive survey design was used. The target population was 17 health-related SMEs. In addition, 172 end - users were sampled using purposive and simple random sampling techniques. Both primary and secondary data were used. Primary data was collected using a semi-structured questionnaire and an interview guide. Secondary data was collected through review of records and documents. Descriptive statistics were used to summarize the properties of the mass data. The Logit model was used to predict the potential effects on the determinants of ICT adoption by SMEs. Open-ended questions were analysed by capturing the common themes, categorizing them, and drawing conclusions from the findings. The research findings showed that age, CEO's ICT knowledge, quality of ICT systems, information intensity, ICT specialization, organizational readiness, relative advantage, government policies on ICT applications, and pressure from suppliers and patients were the main determinants of ICT adoption. The study concludes that, for the health related- SMEs to cope with the dynamics of the global competition and move Kenya towards middle level income country as envisaged in the Vision 2030, the above nine determinants must be addressed. The study, therefore, Recommends that government should develop a differentiated ICT policy arid incorporate compulsory training in computer applications in the national school curriculum. In addition, SMEs should invest in quality systems that are functioning and also technically usable. They should set a mechanism for monitoring the changes in technological innovations as the electronic marketplace evolves. Finally, SMEs should adopt ICT within a participatory plan.
Budget deficits and macroeconomic performance in Kenya (1963-2007): an empirical analysis
(2011-07-21) Kosimbei, G. K.
Budget deficits have attracted a great deal of attention over the past two decades. They have been blamed for the assortment of ills that beset developing countries. The objectives of this study included: describing the budgeting process, explaining the sources of budget deficits, investigating the various methods used by the government of Kenya to finance budget deficits, analyzing the effects of budget deficits on selected macroeconomic variables and finally establishing the types of relationships that exists between budget deficits and selected macro variables. This study was underpinned on the Mundel- Fleming model. It applies Vector Autoregressions (VARs) together with annual time series data for the period 1963 to 2007 to evaluate the empirical effects of budget deficits on macroeconomic performance. The data used were selected macroeconomic variables that included; current account of the balance of payments, private, consumption, private investment, money supply, treasury bill rates, and real GDP. The study established that the budgeting process had loop holes which perpetrated budget deficits. Also, the sources of budget deficits include: level of economic development, low growth of revenues, instability of government revenues, government control over expenditures and the extent of government participation in the economy. The impulse response functions (IRF ) revealed that budget deficits have a significant effect on: private consumption, private investment, money supply (M3), treasury bills rate, current account and real GDP. These effects usually lasted for more than five years. Johansen cointegration tests revealed a long run relationship between budget deficits and the selected macroeconomic variables. The overall recommendation o f this study is that the government of Kenya should formulate a firmer fiscal policy that would minimize budget deficits because they affect economic performance in Kenya.
Determinants of demand for family planning services in city slums in Kenya
(2011-07-25) Okech, Chrispinus Timothy
The Kenya government, in collaboration with other stakeholders involved in the provision of family planning services, have put in place various strategies and policies to increase uptake of family planning services. These are aimed at increasing contraceptive prevalence rate (CPR), reduction in both total fertility rate (TFR) and unmet need for family planning services. Despite the various strategies and policies, total fertility rate still remains high at 4.6 percent, while CPR and unmet need for family planning are estimated at 46 percent and 24 percent, respectively. The purpose of the study was therefore to analyze the determinants of demand for family planning services in city slums in Kenya. To realize this objective, a survey design was adopted. The target population constituted women in city slums in Kenya, who were identified through multistage random sampling. Primary data were collected from the women using a structured interview schedule. A fact sheet was used to summarize the data collected before it was cleaned, coded and edited for completeness and accuracy. A binomial logic model was developed and estimated using two-step regression procedures. The study revealed low usage of family planning services, among women in the city slums attributed to various factors. These include in order of significance, partner's approval, religious background of the woman the woman's knowledge about family planning services and friendliness of the staff administering the services. Other factors included quality of the services, proximity to the facility, while the woman's income level was the least significant factor. The studv recommends that to increase the use of family planning services among women n slums, promotion of family planning education and activities at the household level should be carried out, the activities of community based distributors should be revived and enhanced. Formation of lobby groups to enhance cultural change, awareness creation and counseling, integrating family planning services with HIV/AIDS have also been recommended.
Ripple effects of mimimum wages and the response of labour markets in Kenya
(2011-07-25) Omolo, Odhon'g Jacob
Minimum wage fixing is a key wage determination ;: approach. The use of minimum wages as a benchmark for wage determination in all sectors of the economy contributes to the existence of ripple effects on other wages, and hence distortions in the labour market. This study aimed at estimating the ripple effects of minimum wages on other wages; establishing if the ripple effects differ across sectors of the Kenyan economy; investigating the response of the Kenyan labour market to the ripple effects; and assessing the effectiveness of minimum wage enforcement mechanism in Kenya. The study used a balanced panel data for the period 1986 to 2008, with sectors as the unit of analysis. It employed a multi-pronged approach involving estimation of a random effects model of wage estimation and analysis of measures of importance and toughness of the minimum wage. The study established that minimum wages produce significant wage ripple effects. The ripple effects and their strength, however, differ across wage determination approaches and sectors of the economy. The study also found that the Kenyan labour market responds unequally to the ripple effects. It established that the importance and toughness of minimum wage legislation vary across sectors. With a national mean Kaitz ratio of 0.54, the study found that Kenya's minimum wages have a relatively high biting effect. Based on international benchmarks, the Kenyan labour inspectorate staff was found to be overburdened by up to 167 percent, implying ineffectiveness of the labour inspectorate services and minimum wage enforcement mechanism. Arising from the study findings, it is important that the Ministry of Labour in consultation with social partners and other stakeholders undertake measures to integrate ripple effects of minimum wages in wage determination. There is also need for the Ministry to enhance enforcement of minimum wage regulations. This can he undertaken through modernization and integration of labour inspectorate services, and introduction of self-regulation in the labour sector. These measure are imperative if the minimum wage policy is to achieve its goal as an economic and social policy tool.
Entrepreneurial Orientation and Access to New Markets by Small-Scale Earthenware Manufacturers in Kenya
(2011-08-03) Matanda, Otenyo Margaret
Accessing new markets remains a major challenge to MSEs in Kenya. While factors that influence access to new markets continue to attract much literal attention, the role of entrepreneurial is not clear. This study examined the effects of entrepreneurial orientation on access to new markets among small-scale earthenware manufacturers in Kenya. This was an explanatory study that adopted a survey approach. The study was conducted in three districts: Kakamega, Bungoma and Kisumu. A sampling list of small-scale earthenware manufacturers was constructed from lists provided by district cultural officers in the three study sites. From this sampling frame, a stratified random sampling procedure was used to select the study sample. Entrepreneurial orientation, the mindset of firms engaged in the pursuit of new ventures was assessed using a modified version of the Covin and Slevin (1989) scale. This scale is made up of 14 items that assess innovativeness, risk-taking, proactiveness, competitive aggressiveness and autonomy. A pre-tested questionnaire was used to collect data. This questionnaire was administered through interviews by the researcher with the help of two trained research assistants. Three Focus Group Discussions (FGDs) were conducted to establish the process of entry into new markets. The researcher moderated the FGDs using a pre-tested topical guide. Descriptive statistics (frequencies, percent, mean, standard deviation and charts) were used to present and summarize data. Bivariate data analysis such as contingency tables, correlation, x2 and t-tests were used to assess relationships between sociodemographic factors, entrepreneurial orientation and access to new markets. A logic model was used to identify the critical factors that influence access to new markets. Qualitative data were content analyzed. Three hundred and eighty four enterprises responded to this survey. Four percent of the study respondents had accessed new markets in the last twelve months. A majority of the respondents (53 percent) claimed that the opportunity to access new markets had just occurred. Bivariate data analysis indicated that young married males were more likely to access new markets. Higher levels of education, membership into business associations and attending trainings were also associated with access to new markets. Entrepreneurial orientation was also found to be associated with the entry into new markets. The results of the Logic model indicated that training and innovation influence access into new markets. The 1 - GDs established that the process of new market entry is complex and is made up of initiation and negotiation.
The impact of government expenditure on economic growth in Kenya:1963-2008
(2011-08-03) Maingi, N. James
The rapid growth in government expenditure in Kenya has caused concern among policy makers on the implication of such growth. Over the three decades, government expenditure in the country grew at a faster rate than the growth rate of GDP. Given this fiscal scenario, an explanation of this requires studying the impact of government expenditure on economic growth. The specific objectives of the study were to: investigate the relationship between the components of government expenditure and economic growth; examine the effects of components of government expenditure on GDP growth rate; and analyze the effects of government expenditure reforms on economic growth. The data used were government expenditure components that included expenditure on government investment, physical infrastructure, education, health care, public debt servicing, economic affairs, general administration and services, defense, public order and national security, and government consumption. Sources of data were Kenya government documents and international financial publications. The study applied Vector Auto Regression estimation technique using annual time series data for the period 1963 to 2008 to evaluate the impact of government expenditure on economic growth. The Johansen cointegration tests revealed a long-run relationship between GDP growth rate and the selected components of government expenditure. Further, the Granger- Causality test indicated bi-directional causality between GDP growth rate and components of government expenditure. The results of impulse response functions and variance decomposition revealed that government expenditure on investment, physical infrastructure, education, health care, public debt servicing, economic affairs, general administration and services, defense, public order and national security and government consumption had effect on economic growth. 1 urthermore, the study established that expenditure reforms that include budget rationalization, expenditure downsizing, privatization and governance affect economic growth. The study concludes that the composition of government expenditure and public expenditure reforms matter for economic growth.
Total factor productivity change in the Kenyan manufacturing sector: A malmquist index analysis
(2011-08-15) Gachanja, Paul Mwangi
Industrialization has been embraced by many developing countries as a means of achieving structural transformation of the economies. In Kenya, the goal to industrialize has long been held as a strategy for economic development. It has received emphasis as the main strategy for addressing the principal challenges of development in Kenya; employment creation and poverty eradication. While Kenya inherited a relatively well established manufacturing sector at independence in 1963, the sector's overall performance has been rather dismal. The share of the manufacturing sector in GND, which accounts for over 70 percent of the industry, has changed little over the last three decades. At the same time, the sector which was expected to play a leading role in the country's development and growth process has not been dynamic enough to effectively play this role. The study examined Kenya's manufacturing sector to empirically analyze the total factor productivity change. The study used the latest World Bank's Regional Programme on Enterprise Development firm level data for the period 2000-2003 to form a panel over the three year period 2000, 2001 and 2002. The total factor productivity change over the period was measured and decomposed into efficiency change and technical change. The study used data envelopment analysis (DEA) to derive Malmquist productivity indices. The study revealed an overall decline in Total Factor Productivity (TFP) of about 8.3 percent. The decline resulted mainly from declining which dropped by about 17.8 percent over the period despite an overall technical progress of about 11.5 percent. In as far as the sub-sectors were concerned, the study revealed that only the chemicals and pharmaceuticals sub-sectors recorded a TFP growth of about 7.9 percent. The textile and wood and furniture sub-sectors recorded an efficiency improvement of about 11.8 and 6 percent, respectively. Efficiency change was revealed to be the major source of TFP changes. The vision 2030 envisages the development of a robust, diversified and competitive manufacturing sector. The overall goal for the sector for the next five years is to increase its contributions to GDP by at least 10 percent per annum and moving Kenya to a middle income country by year 2030. The study concluded that, for the manufacturing sector to play the crucial role in employment creation and poverty eradication, the infrastructural and institutional bottlenecks bedeviling the sector must be addressed. These includes; low capacity utilization, poor infrastructure, lack of innovation, licensing and security.
Cultural and social determinants of entrepreneurial behaviour among small enterprise owners in eldoret municipality, Kenya
(2011-08-16) Korir, Michael Kirwa; Kibas, Peter; Thoruwa, T. F. N.
The role of culture and social factors on the development of entrepreneurship is an emerging theme of research but results remain ubiquitous. Others have concluded that an individualistic culture fosters entrepreneurial behaviour while collectivist culture retards them. Others have argued that culture and socialisation process does not have any bearing on entrepreneurial behaviour. Besides, empirical studies that forge these propositions in an African setting, and specifically in Kenya, are scanty. This study examined cultural and social determinants of entrepreneurial behaviour among smallscale entrepreneurs within Eldoret Municipality in Kenya. It anchored on hypotheses that relate several cultural and social factors to the development of entrepreneurial mindset, motives and orientations as components of entrepreneurial behaviour process. The study employed a triangulation of descriptive and explanatory designs. Using cluster, simple random and systematic sampling techniques with the support of key informant interviews, a cross-sectional survey of 387 entrepreneurs running small businesses within Eldoret municipality was conducted. A self-administered questionnaire was used to collect primary data. Data was analysed using descriptive and inferential statistical tools. Specifically, factor analysis was used to validate and construct indices for the preconceived variables while Analysis of Variance and Structural Equation Modelling in the form of Path analysis were utilised to test hypotheses. Theory testing results show that the Hofstede's cultural value dimensions remains conceptually valid, albeit explaining a small proportion of variance (38.4%); thus suggesting some extension. Similarly, the 'Push-Pull' theory of entrepreneurial motives (57.37% of variance explained) and the Entrepreneurial Orientations model (48.0% of variance explained) remain valid in explaining entrepreneurial behaviour in an African developing country context. Results of hypothesis testing indicate that entrepreneurs from the six referenced ethnic groups exhibited significant (P<.05) varying degrees in business start-up motives variables and propensity to employ, but generally displayed similar post start-up orientations. Other significant (p<.05) sociomicro factors that were found to have moderating effects on entrepreneurial behaviour include level of education, gender, religion, parental occupation, age and marital status. Paradoxically, findings from Structural Equation Models show a positive but not significant causal relationship between cultural value dimensions and business start-up motives but a negative causal relationship between cultural value dimension and post start-up orientations. Specifically, cultural value dimensions of Collectivism, Long-term orientation and Orthodoxy appear to impede entrepreneurial behaviour. While the presence of role models was found to have a positive effect on all the stages of entrepreneurial behaviour process, the bonding dimensions of social capital seem to impede its development. These findings hold implications for the intensification of entrepreneurship education and training, mooting of entrepreneurship policies that target the youth, retiring and women groups, more involvement of religious organisation in entrepreneurship development, and a call for cultural and social transformation, if the goal of building an entrepreneurial economy and culture in Kenya is to be realised. Future research should explore more linkages between culture and entrepreneurship using longitudinal research designs. The validation of measurement tools and use of case approach in exploring effects of role models is also open for further research
The determinants of tax Revenue in Kenya
(2011-12-16) Wawire, N. H. W.
Several studies have been undertaken on the responsiveness of tax revenues to changes in GDP in Kenya. These studies 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 tax revenues are unreliable for planning purposes, a situation that might be responsible for recurring budget deficits. The main objective of this study was to examine the composition of tax revenues and properly estimate income elasticities of various taxes. 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 thesis uses Paul Samuelson's (1955) fundamental general equilibrium analysis of the public sector to derive its main results. In my framework, the demand function for the public good is derived from a constrained model of utility-maximization. In the same vein, tax revenues are taken as functions of household incomes, which paves the way for the estimation of Engel curves for public goods. The study finds that tax elasticities for total taxes, income taxes, and excise duties with respect to GDP are less than unity. Elasticities of excise duties with respect to the volume of imports and volume of trade are less than unity, as is the elasticity of import duty with respect to the volume of trade. On the other hand, growth elasticities for direct taxes and sales taxes are all greater than one. The elasticity of the direct tax revenue with respect to GDP is found to be unitary. The estimation results show that total GDP elasticities of tax revenues are less than the elesticities with respect to monetary GDP, suggesting the existence of an underground economy in Kenya over the period analyzed. The study shows that population growth has adverse effects on tax revenues. It is found that tax revenues respond with substantial lags to changes in tax determinants and that tax revenues are sensitive to unusual circumstances. The study concludes that Kenya's tax revenues are only moderately responsive to changes in their determinants. There is therefore the challenge of creating flexibility in the tax system so that tax revenues can increase rapidly as the economy grows.
Households' saving decisions in Kenya
(2012-03-29) Mbuthia, Aflonia Nyambura
Household's financial Savings form an integral part of a nation's savings level. Financial institutions mobilize the households' savings and allocate them to the most efficient investments. Studies conducted in developing countries, Kenya included, indicate that most households save in informal financial institutions. Low savings in formal financial institutions limit the amount of funds available for long term investments. This study sought to examine the underlying factors determining a household's choice of saving in formal, semi-formal and informal financial institutions using a separate bivariate logistic model for each of the institutions. In addition, the study examined the determinants of households' level of financial savings using weighted ordinary least squares method. Correlation between decision to save in formal, semi-formal and informal financial institutions was identified through pair wise correlations. Major hindrances to ownership of bank accounts were also identified. The study utilized secondary data collected from a sample of 6598 Kenyan households. In each of the three forms of financial institutions, the level of financial information held about the financial institution, credit availability in the financial institution and the level of a household income were the most significant variables, in a household's decision to save in a particular financial institution. The level of household income, perceptions of high interest rates on savings held in financial institutions and the main financial service provider being a formal financial institution significantly increased the level of household financial savings. Positive correlations were found between savings in all the financial institutions although they were stronger between savings in formal and semiformal financial institutions. Resource constraints in a household were the major hindrance to ownership of a bank account. The ministry of finance should collaborate with the banking sector to introduce financial education programmes to enlighten the public on the benefits of saving in formal and semi-formal financial institutions to enhance long-term finance. In addition, the government, through the relevant ministries, need to introduce measures to enhance incomes especially among households who derive most of their income from the informal sector. The increased incomes would not only increase the probability of households saving in formal and semi-formal financial institutions but would also increase the households' level of financial savings. The ministry of finance should encourage the growth of the microfinance industry which has strong positive correlations with the formal financial institutions. Informal financial institutions, especially women groups, should be encouraged to open bank accounts and join semi-formal financial institutions either individually or as groups. This would strengthen the linkage between savings in informal and semi-formal and formal financial institutions and boost overall household savings.
An econometric analysis of energy utilization in the Kenyan manufacturing sector
(2012-06-11) Onuonga, S.M.; Etyang, Martin N.; Mwabu, Germano
The overall purpose of this study was to analyze the factors that influence energy utilization in Kenya's manufacturing sector and to determine the extent of substitution possibilities between energy inputs and other non-energy factors of production within the Kenyan manufacturing sector over the 1970- 2005 period.The Kenya manufacturing sector is a major consumer of commercial energy in Kenya. It is the second largest user of petroleum products and the largest user of electricity. There is hardly any evidence that shows that the sector uses biofuels. The analysis of price and non-price variables that affect the use of energy within this sector is necessary for designing policy measures that can lead to energy conservation. Information on the degree of energy substitution is important in predicting the effects of energy shortages on manufactured output and industrial employment. This study used the translog model to analyze total factor demands and inter-fuel substitutions. Estimation was done in two stages. First, the sub-energy model was estimated and an aggregate energy index computed. In the second stage, the total factor cost shares were analyzed using the estimated energy price index as an instrumental variable. Estimation in all stages was done by the use of Maximum Likelihood Method. In divergence from the previous studies in Kenya, time series properties of the data were fully investigated before model estimation was done. The study found that, price of energy, cross price, output, technology, price of capital and unexpected events (droughts, U.S.A's attack on Iraq in 2003, and multiparty elections) influenced the sector's use of energy. The results for interfuel model indicated that demand for electricity and oil in the Kenyan manufacturing sector were price inelastic and that oil and electricity are substitutes. The fuel price and the cross price elasticities were found to be small but statistically significant. These results imply that manipulation of the fuel prices alone cannot achieve much in controlling the use of energy in the Kenyan manufacturing sector. Limited substitution possibilities between electricity and oil in this sector were found. Small substitution possibilities between energy and non-energy inputs were also detected. The results for the total factor cost shares showed that demand for energy and labour were price inelastic while that one of capital had a unitary elasticity. The results further showed that energy, labour and capital were substitutes, but the degrees of substitution among the factors were found to be very low, ranging from 0.07 to 0.75. This suggested that costs of production within the sector might rise significantly as a result of the price increase of the inputs, especially of energy
Bank efficiency, mergers and acquisitions and shareholder effects in Kenya
(2013-01-22) Muniu, J. M.; Obere, Almadi; Mburu, Tom Kimani; Odour, Jacob
Mergers and Acquisitions have become a prominent feature in Kenya's banking industry. The Central Bank of Kenya and shareholders of banking institutions in Kenya have a positive inclination to mergers and acquisitions. However, Kenya has witnessed a mix of dismal performance by some merged banking institutions and very positive performance by others. This has left stakeholders in the banking industry wondering whether mergers and acquisitions should be encouraged in the industry. This study therefore aimed at analyzing the value effects of mergers and acquisitions in Kenya's banking industry in a bid to offer a solution to this pertinent issue. The study investigated performance, efficiency and shareholders' wealth effects of banking institutions' mergers and acquisitions in Kenya between the years 1989 and 2010. Two major approaches were used in the study to determine the value effects of banking institutions mergers and acquisitions. These entailed modelling performance and efficiency effects to capture benefits streaming to the institutions and analyzing stock returns to determine shareholders' value effects. The study also determined the bank specific determinants of successful banking institution mergers and acquisitions. The study found that although mergers and acquisitions led to improved profit efficiency, large banks benefited more from improved performance than the small banks. Primary shareholders of banking institutions that engaged in mergers and acquisitions benefited from improved profit performance and stability in their wealth holding, while secondary shareholders did not experience capital gains. The study also found that the larger the merged banking institution, the higher was the probability of its success as a merger. Finaily, higher expenditure levels also contributed positively to the probability of success of mergers and acquisitions. It is therefore the recommendation of this study that incentives for value enhancing mergers be offered. The government should also encourage more investment in the banking industry specifically targeting the small banking tier. Finally, merged banking institutions should spend more on advertisement, labor and modern technology to increase their probability of success
Food crops production response to economic incentives:A case of selected crops in Kenya
(2013-01-22) Onono, Perez Ayieko; Nelson, H.W.Wawire; Charles Ombuki
Despite the provision of incentives for increased production of food crops by the government of Kenya, outputs of major crops have been below domestic requirements. Findings from earlier studies reported inelastic responses of maize production to producer prices and emphasised the importance of complementary policies targeting non-price factors to raise production. However, the influence of non-price incentives on maize production was not assessed in those studies. The literature surveyed does not also provide knowledge on the production behaviour of sorghum and millet even though government policy has targeted their expansion over the years. This study investigated the response of maize, sorghum and millet production to both price and non-price incentives. The aim was to ascertain their relative importance in influencing production of the crops as well as complementarity between price and non-price incentives. The data used was obtained from published sources for the period 1972 to 2008. An autoregressive distributed lag (ARDL) model was adopted for each crop. The findings show that maize production responds positively to its output price, sorghum price, development expenditures in agriculture, maize sales to marketing boards, growth in per capita GDP, liberalisation and governance reforms. However, maize production responds negatively to fertiliser price and unfavourable weather conditions. The response of maize output to its price is lower with rising inflation and grain market liberalisation. Sorghum production responds positively to millet price, fertiliser price, agricultural wage, development expenditure in agriculture, growth in per capita GDP and shocks in maize production. But sorghum output responds negatively to maize output price, development expenditure on roads, transport and communication and inflation. The response to fertiliser price is higher with rising inflation but lower with increased development spending in agriculture. Millet production responds positively to agricultural wage, development expenditure on roads, transport and communication and governance reforms. Millet production however responds negatively to fertiliser price, lending rate, growth of per capita GDP, Iiberalisation and drought. The inelastic response of output to most of the incentive variables suggests that a comprehensive policy combining both price and non-price incentives is required to raise food crops production in Kenya.
Effects of Regional Financial Intergration on Economic Growth and Intra-Regional Trade of East African Community Member Countries
(2013-03-22) Karagu, Samuel Muthoga
The study aimed at establishing the effects of regional financial integration on economic growth and intra-regional trade in East African Community (EAC) Countries. The motivation was based on the conflicting views on the effect of regional financial integration on economic growth and intra-regional trade. In order to achieve the objectives of the study, both quantitative and qualitative data were used. Data for the period 2000 to 2009 for Kenya, Uganda, Tanzania and Rwanda were employed. Burundi was not included because of insufficient data. The first objective of the study was to establish the effect of regional financial integration on economic growth in EAC. The second objective of this study was to in ~!!Itig t~ th Elff@Qt f ~gi(:mlll finill'lQi I int@grlltign gn intrll-r@gi n~J trade in EAC. System General Method of Moments dynamic panel model was employed to estimate the cross-country growth and intra-regional trade effects of regional financial integration. Regional financial integration was proxied by the following three measures; squared exchange rate of the four countries. Control variables used in the regression included lagged economic growth rate, inflation, government balance as a percentage of GDP, foreign direct investment as a percentage of GDP, corruption perception index and the Rwandan dummy variable, which took. the. value of one from the time Rwanda and Burundi joined the EAC and Zero -otherwise. The empirical results showed that regional financial integratiori' significantly stimulated the economic growth of the East African Community Countries. Regional financial integration complemented intra-regional trade among the EAC countries. The third objective was to determine whether the effect of regional financial integration on economic growth and trade differed among member countries. The study found out that the effect of regional financial integration on economic growth differed among member countries. However, the effect of regional financial integration on intra-regional trade did not differ among member countries. The study recommends the EAC coordinating committee should ensure there is effective bank supervision in the region so as to have a uniform banks spread across the region, explore ways of issuance of common bond in the region and have secondary markets for financial assets effected.
Households' saving decisions in Kenya
(2013-03-26) Mburugu, Hellen N.
Household's financial Savings form an integral part of a nation's savings level. Financial institutions mobilize the households' savings and allocate them to the most efficient investments. Studies conducted in developing countries, Kenya included, indicate that most households save in informal financial institutions. Low savings in formal financial institutions limit the amount of funds available for long term investments. This study sought to examine the underlying factors determining a household's choice of saving in formal, semi-formal and informal financial institutions using a separate bivariate logistic model for each of the institutions. In addition, the study examined the determinants of households' level of financial savings using weighted ordinary least squares method. Correlation between decision to save in formal, semi-formal and informal financial institutions was identified through pair wise correlations. Major hindrances to ownership of bank accounts were also identified. The study utilized secondary data collected from a sample of 6598 Kenyan households. In each of the three forms of financial institutions, the level of financial information held about the financial institution, credit availability in the financial institution and the level of a household income were the most significant variables, in a household's decision to save in a particular financial institution. The level of household income, perceptions of high interest rates on savings held in financial institutions and the main financial service provider being a formal financial institution significantly increased the level of household financial savings. Positive correlations were found between savings in all the financial institutions although they were stronger between savings in formal and semiformal financial institutions. Resource constraints in a household were the major hindrance to ownership of a bank account. The ministry of finance should collaborate with the banking sector to introduce financial education programmes to enlighten the public on the benefits of saving in formal and semi-formal financial institutions to enhance long-term finance. In addition, the government, through the relevant ministries, need to introduce measures to enhance incomes especially among households who derive most of their income from the informal sector. The increased incomes would not only increase the probability of households saving in formal and semi-formal financial institutions but would also increase the households' level of financial savings. The ministry of finance should encourage the growth of the microfinance industry which has strong positive correlations with the formal financial institutions. Informal financial institutions, especially women groups, should be encouraged to open bank accounts and join semi-formal financial institutions either individually or as groups. This would strengthen the linkage between savings in informal and semi-formal and formal financial institutions and boost overall household savings.
The data envelopment analysis and stochastic frontier approaches to the measurement of hospital efficiency in Kenya
(2013-07-25) Korir, J.K.
After independence in 1963, the government of Kenya pledged to fight diseases, ignorance and poverty in the country. The policies that the government has pursued over the years have had a direct impact on health status of Kenyans, as evidenced by a steady reduction in crude death rate, a decline in fertility, and an increase in life expectancy at birth among others. These gains notwithstanding, reversal in health status trend is evident, as the child mortality rate is now on the increase. Despite the massive expansion of health infrastructure after independence, the inability of the government to effectively provide health services became acute in the 1980s due to a sharp increase in demand for health services. The growing lack of resources in the public health sector resulted in a decline in efficiency and quality of government health services. The government responded to these adverse developments by undertaking a bold programme of reforms aimed at improving efficiency at public health facilities. The purpose of this study was to measure efficiency in government hospitals over the period 1995-2000 when the reforms were implemented. In order to achieve this objective, a frontier cost model was estimated using data from a sample of 41 public hospitals in Kenya. This sample size represented about 40% of the public hospitals in the country. Secondary data on recurrent expenditure, number of inpatients and outpatients during the study period augmented the data from the hospital sample. The estimation results showed that all the 41 hospitals recorded steadily increasing efficiency levels during the study period. The amount of recurrent expenditure incurred by the sample hospitals was approximately Ksh 13 billion over the study period, against a background of gross inefficiency in resource use. Had the hospitals operated efficiently over this period, savings in financial terms could have been between Ksh 1 billion and Ksh 1.4 billion. The results showed that the reforms implemented by the Ministry of Health contributed to efficiency improvements in public hospitals. Another finding is that efficiency measures by the two methods employed (data envelopment analysis and stochastic frontier approach) were similar for the overall sample but differed significantly across individual hospitals. The results suggest that the Ministry of Health should put more effort to reducing inefficiency in service provision, as this can be done. Moreover, there is need for the Ministry to maintain a database on the inputs used by each hospital and services it provides, to facilitate measurement of efficiency on an annual basis, as efficiency information is key to the upgrading of service quality.
Effects of foreign aid predictability on investment and economic growth in Kenya
(2013-08-14) Ojiambo, Elphas Victor
Foreign aid forms one of the largest components of foreign capital flows to low-income countries. Since attaining political independence in 1963, Kenya has been dependent on foreign aid for capital and social investments. The Paris declaration of 2005 commits donors to provide reliable, indicative commitments of aid over a multi-year framework and also disburse aid in a timely and predictive manner in line with the agreed schedules. Studies have also argued that stable macroeconomic policy environment is a requisite for aid effectiveness. However, foreign aid flows in Kenya have been unpredictable and the macroeconomic policy environment unstable. The general objective of this study, therefore, was to examine the effects of foreign aid predictability on investment and economic growth in Kenya. Specifically, the study sought to examine the effect of foreign aid on investment and economic growth; examine the effect of macroeconomic policy environment on foreign aid, investment and economic growth; analyse the effect of aid unpredictability on investment and economic growth; and suggest policy implications. The study drew from the Samuelson model and used time series data for the period 1966-2010. The data was collected from published sources. It employed the autoregressive distributed lag estimation technique. Results of the bound tests indicated that there was a long-run relationship between the variables. The study found that foreign aid had a positive effect on Kenya’s economic growth and public investment. The lagged effects of foreign debt positively affected economic growth and public investment after one year and negatively thereafter. The empirical findings show that private investment positively affected economic growth and public investment. It was found that there was a complementary relationship between private investment and public investment. Kenya’s macroeconomic policy environment was found to be unstable over the study period thus negatively affected economic growth and public investment. This was despite the macroeconomic policy reforms that the Government of Kenya had undertaken and the push for such reforms by the development partners. Foreign aid flows to Kenya were found to be unpredictable and negatively affecting economic growth and public investment despite Kenya and her development partners having committed to work towards predictable foreign aid. In light of the foregoing, this study recommended among other things, the need to review Kenya's Joint Assistance Strategy, ensuring sustained economic growth of over 10 per cent while keeping inflation low. Additionally, there is need to encourage private investment in the country and that development partners have a role to play in this respect as part of their commitments in Busan in 2011.
Effects of fiscal policy on private investment in Kenya (1964 – 2010)
(2013-08-14) Njuru, Stephen Gitahi
Private investment in Kenya has been low for the last four decades. This has stimulated much concern to the policy makers‟ bearing in mind that investment is a key variable influencing economic growth. The government of Kenya has over the years designed economic policies with an aim of rejuvenating private investment which was robust during the first decade of independence before deteriorating in the other decades. Fiscal policy has been a major focus towards this direction. The main purpose of this study was to investigate the effects of fiscal policy on private investment in Kenya from 1964 to 2010. The study adopted modified flexible accelerator model to enlighten on the economic relationship between private investment and the other variables. It applied vector auto-regression modeling technique and error correction model to estimate the effects of fiscal policy variables on private investment. The study made use of semi-annual time series data for the period 1964 to 2010. Since some of the variables were stationary at levels while others became stationary at first difference, the study used Johansen cointegration tests to determine long-run relationship between private investment and the aforementioned fiscal variables. Further, the Granger-Causality test was undertaken to determine economic relationship between the variables. The results of the study revealed that fiscal policy design and implementation matters to private investment levels in Kenya. The study found that taxes, government expenditure, government debt servicing and fiscal reforms could either promote or deter private investment both in the short-run and in the long-run. The study concludes that appropriate measures xv ought to be taken while coming up with fiscal policy framework to ensure that as it achieve other objectives of the government, growth of private investment is taken into account
Telecommunication infrastructure and economic growth: a case of Sub-Saharan Africa (1988-2010)
(2013-08-15) Wainaina, Martin C.
The need for an efficient, modern telecommunication sector is now regarded as crucial to economic growth in transition countries. Various studies have given conflicting findings on the relationship between economic growth and telecommunication. In addition, studies of different regions of the world have had different findings, with Africa recording least of these studies. Sub-Saharan Africa had registered the lowest levels of GDP growth across the world despite having registered the fastest growth rate in terms of telecommunication growth. This calls for a thorough investigation on the role, relationship and, direction of causality between telecommunication growth and economic growth. The objectives of the study were to; determine the relationship between mobile teledensity and economic growth; investigate the relationship between landline teledensity and economic growth and; analyze the effects of interaction between mobile teledensity and landline teledensity and how teledensity affect on economic growth. To achieve the objectives, the study adopted the neoclassical growth model developed by Solow and Swan (1956).Using relevant diagnostic tests, Generalized Method of Moment (GMM) method of estimation was used on the panel data from 44 of Sub-Saharan Africa countries (1988 to 2010), the study found out a two-way causality for mobile teledensity and economic growth. On the other hand landline teledensity growth was found to influence economic growth and not vice versa. In addition telecommunication investment was found to be subject to diminishing returns, suggesting that countries at an early stage of development are likely to benefit most by investing in telecommunications infrastructure. Other factors found to influence growth included; population growth, investment, and trade openness. The study proposes that the respective governments of sub-Saharan countries should implement policies that enhance the development of the telecommunications sectors in their respective countries, increase attention to measures that would increase mobile telephone penetration. The respective government should focus on measures that would attract more foreign direct investment, allow more reforms in the telecommunication sector to allow more investment and eliminate or reduce barriers to trade. This is because the result shows that removal of trade barriers increases trade amongst countries. In addition increased trade will see further usage of mobile telephone to transact business.

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