PHD-Department of Applied Economics

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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.
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.
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.
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 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.
Private Capital Inflows, Remittances and Economic Growth in Kenya
(2014-02-18) Ocharo, Kennedy Nyabuto; Wawire, N. H. W.; Ng'ang'a, Tabitha Kiriti
Most studies on private capital inflows and economic growth are cross-country and give more weight to foreign direct investment than the other components of private capital inflows. Moreover, these studies have not included remittances as an explanatory variable in their estimation procedures. In addition, the question as to whether it is private capital inflows that promote economic growth or it is economic growth that attracts private capital inflows has not been investigated in Kenya. This study investigated the causality between foreign direct investment, portfolio investment and cross-border interbank borrowing and economic growth; analyzed the effect of foreign direct investment, portfolio investment and cross-border interbank borrowing on economic growth; and examined the effect of remittances on economic growth in Kenya. The data used was sourced from World Bank‟s African Development Indicators and various Economic Surveys and Statistical Abstracts for the period 1970 to 2010. The study used Granger Causality to investigate the causality between foreign direct investment, portfolio investment and cross-border interbank borrowing and economic growth. The ordinary least squares estimation was used to determine the effect of foreign direct investment, portfolio investment and cross-border interbank borrowing; and remittances on economic growth. The study found that there was a unidirectional causality from foreign direct investment to economic growth and from economic growth to cross-border interbank borrowing. Regression results showed that the coefficient of foreign direct investment as a ratio of gross domestic product was positive and statistically significant, and the coefficients of portfolio investment as a ratio of gross domestic product and cross-border interbank borrowing as a ratio of domestic product were positive and statistically insignificant. Similarly, the coefficient of remittances as a ratio of gross domestic product was positive and significant. Following these results, the Government of Kenya should work towards an environment that attracts foreign direct investment, pursue a high and sustainable economic growth rate so as to attract cross-border interbank borrowing and put in place policies that encourage remittances.
Essays on Farm Technology Adoption, Technical Efficiency and Productivity in Smallholder Food Crop Agriculture in Kenya
(2014-02-26) Ogada, Maurice Juma; Muchai, Dianah; Nyangena, Wilfred; Mwabu, Germano
With the rapidly increasing population and the associated decline in landholding sizes, the government of Kenya has realized that agricultural extensification is no longer possible for most parts of the country. Consequently, development and promotion of land-augmenting technologies such as inorganic fertilizers and improved seeds have been pursued as the most viable alternatives towards increasing agricultural productivity. However, adoption of farm technologies in the country remains low among smallholders and widely varying across regions. Moreover, even where these improved technologies have been well adopted, productivity has stagnated for most crops. Thus, this thesis sought to analyse factors that influence adoption of improved farm technologies, measure technical efficiency and establish factors that influence its variation across households, and estimate the effects of adoption of improved technologies on crop yields among the smallholders. To address the first objective, inter-dependence of inorganic fertilizer and improved maize varieties adoption decisions was examined. For the second objective, data envelopment analysis was used to compute the technical efficiency scores. Tobit model was then used to establish the factors that influence inter-household variation in technical efficiency. In response to the third objective, yield differences were examined among complete, partial and non-adopters of inorganic fertilizer and improved maize varieties using combined Difference-in-Differences and Propensity Score Matching. Overall, the thesis makes contribution in terms of both literature and methodology. Results showed that adoption decisions on related technologies were inter-dependent. Such decisions were also influenced by farmer characteristics, plot-level factors and market imperfections. The smallholders were found to be technically inefficient, producing only 60 per cent of the possible output. Great inter-household variations in technical efficiency existed, influenced by farmer characteristics, production environment and production risks. Inorganic fertilizers and improved maize varieties were found to increase yields especially if adopted as a package and if farmers were more efficient. Policy implication of these findings is that the government, the technology developers and the development partners should have a two-pronged approach in scaling up yields among the smallholders. Foremost, they have to implement incentives to accelerate complete adoption of these technologies. Easing market imperfections would be an important step towards this. Second, they should address the constraints to farmer efficiency. Viable alternatives include improving transport and marketing infrastructure, encouraging the smallholders to supplement inorganic fertilizer with manure, enhancing irrigated agriculture, advising smallholders to keep optimal plot sizes, and entrenching secure land tenure.
Institutional, Governance and Economic Factors Influencing Foreign Direct Investment Inflows on East Africa
(2014-08-21) Karau, James Ngondi; Mburu, T. K.; Kosimbei, G.; Korir, J.
Development economists suggest that Foreign Direct Investment (FDI) is important for economic growth as it provides the much needed human and physical capital as well as improved technology for investment. East Africa exhibited the lowest in-flow of FDI when compared to other African Regions, despite the substantial policy and structural changes as well as economic integration that had been taking place in the East Africa during the study period. The main objective of this study was to examine the institutional, governance and economic factors influencing FDI Inflows in Eastern African Countries. Non-experimental panel data analysis was conducted for eight Eastern African Countries during the period 1996-2010. This study employed an econometric technique for analysis of various variables included in the model. FDI was the endogenous variable on which the exogenous variables were regressed. These exogenous variables included institutional, governance and economic factors that influenced FDI. A one-way fixed effects least squares dummy variable model was estimated. The study found that institutional and governance variables particularly control of corruption, political stability, rule of law and infrastructure significantly influenced FDI inflows to East Africa. Other than institutional variables, other factors like inflation, economic growth and rate of return on investment were also found to be significant. But external debt service did not significantly influence FDI inflows. The findings suggested that East African governments needed to strengthen their institutional base and governance as well as improve their macroeconomic environment in order to attract more FDI. The EA Countries should invest heavily on infrastructure, rule of law and control of corruption to enhance FDI inflows.
Agricultural Trade and Economic Growth in East African Community, 2000 - 2012
(Kenyatta University, 2015) Ouma, Duncan O.
Agricultural activities contribute about 33% of the East African Community‟s Gross Domestic Product (World Bank, 2009), 80 per cent of the populace depend on agriculture directly and indirectly for food, employment and income, while about 40 million people in EAC suffer from hunger. Intra-EAC trade is very low, that is, at 9 per cent of the total regional trade, but it is on upward trend. Agricultural trade accounts for over 40 per cent of the intra-EAC trade. This study investigated the causes of intra-EAC agricultural trade, effect of EAC regional trade agreement on the regions agricultural trade by analyzing the degree of trade creation and diversion effects, and examined relationship of the regional agricultural trade with the region‟s economic growth. Several Augmented gravity models were estimated using the Pseudo Poisson Maximum Likelihood (PPML) Approach. Several bi-variate Vector Auto-Regressive (VAR) and Vector Error Correction (VEC) models were also estimated. Granger causality test and Impulse response analysis on trade and economic growth were performed using panel data from UNCOMTRADE, International Financial Statistics and World Development Indicators for the period 2000 – 2012 on the five EAC members and other 77 trade partners. The empirical findings showed mixed results for the different EAC member states. The intra-EAC agricultural exports depended on various factors, including GDP of exporter, GDP of the importer, Exchange rate, distance between the economic centres, language similarities, adjacency and population of the exporter. EAC regionalism had no significant effect on agricultural exports of Burundi, Rwanda and Uganda, while Kenya and Tanzania had reported significant effect of regionalism on their agricultural exports. Furthermore, the study findings showed that there existed bi-directional relationship between agricultural exports and economic growth in Kenya, uni-directional relationship in Rwanda, and no relationship at all in Burundi, Tanzania and Uganda. EAC secretariat in collaboration with governments of EAC member states should enhance integration among the member states, as membership to EAC had significant effect on trade volumes for Kenya and Tanzania. EAC secretariat and respective governments in EAC should also reduce currency value disparities among the member states as a means of promoting intra-regional agricultural trade. The proposed monetary union and harmonization of currencies would significantly promote agricultural trade within the region. The EAC member states should also enhance border liberalization, as this will also promote intra-regional agricultural trade. Finally, to achieve and sustain high economic growth, Kenya and Rwanda governments should promote agricultural exports to both the EAC region and beyond, this is because empirical results show that a shock in agricultural exports for the two countries have a long run positive effects on their economic growth. This study concluded that EAC regional trade agreement has a potential of promoting EAC regional agricultural trade. Intra-EAC agricultural trade can still be improved and that the regional trade promotes economic growth in Kenya and Rwanda.
Determinants of Scheme Design in Occupational Defined Contribution Schemes in Kenya
(Kenyatta University, 2015-01-22) Tari, Justus
Defined contribution schemes involve no promises about the size of the benefits and no risk to the employer. The risk of ending up with low or no benefits falls entirely on the scheme members. It is necessary therefore, that determinants of scheme design are carefully considered in establishment and review of defined contribution schemes to deliver adequate benefits to members. Based on modern portfolio and the life cycle theories, the study investigated the key determinants of scheme design in occupational defined contribution schemes in Kenya. First, the study evaluated employer related determinants of scheme design; secondly, it evaluated trustee related determinants of scheme design and lastly it evaluated regulatory related determinants of scheme design. Primary data were collected using a questionnaire administered to scheme administrators in the sample. Descriptive statistics were used to profile respondents, describe sample characteristics and a logistic econometric model was applied to evaluate the determinants of scheme design. Overall, the majority of retirement benefits schemes in Kenya were designed as pension schemes and contributory. The average employee and employer contribution rates were 11.96 and 14.84 percent respectively, with most schemes reporting the basis of contribution as the basic salary. However, most schemes did not allow additional voluntary contributions to augment member benefits. Most schemes had undergone some form of design change since inception, with the overriding change being conversion from defined benefit to defined contribution. Most schemes had a bigger proportion of their investments in treasury bonds and bills, with a majority not setting any investment performance targets. In addition most schemes did not target any level of pensions to their members and paid pension through purchase of annuities. In addition, most scheme administrators reported that their scheme design was poor. The study showed that the key employer related determinants of scheme design were the employer‘s budgetary constraint and recognition of the length of service of scheme members, while the key trustee related determinant of scheme design was investment strategy. The results also revealed that the key regulatory related determinant of scheme design was the existence of a separate public pillar. Gender was important but was mostly associated with poor scheme designs. From the findings, it was recommended that employers should consider pensionable salary, budget constraint, length of service, retirement age and occupation in designing schemes while trustees should consider investment returns, target pension, charges by service providers, annuity rates and the investment strategy. Lastly regulatory agencies should consider incentives for participation, taxation rules, existence of a separate pillar and gender in the design of occupational defined contribution schemes. This would guarantee members a reasonable standard of living after retirement.
Agricultural trade and economic growth in East African Community, 2000 - 2012
(Kenyatta University, 2015-03) Ouma, Duncan O.
Agricultural activities contribute about 33% of the East African Community‟s Gross Domestic Product (World Bank, 2009), 80 per cent of the populace depend on agriculture directly and indirectly for food, employment and income, while about 40 million people in EAC suffer from hunger. Intra-EAC trade is very low, that is, at 9 per cent of the total regional trade, but it is on upward trend. Agricultural trade accounts for over 40 per cent of the intra-EAC trade. This study investigated the causes of intra-EAC agricultural trade, effect of EAC regional trade agreement on the regions agricultural trade by analyzing the degree of trade creation and diversion effects, and examined relationship of the regional agricultural trade with the region‟s economic growth. Several Augmented gravity models were estimated using the Pseudo Poisson Maximum Likelihood (PPML) Approach. Several bi-variate Vector Auto-Regressive (VAR) and Vector Error Correction (VEC) models were also estimated. Granger causality test and Impulse response analysis on trade and economic growth were performed using panel data from UNCOMTRADE, International Financial Statistics and World Development Indicators for the period 2000 – 2012 on the five EAC members and other 77 trade partners. The empirical findings showed mixed results for the different EAC member states. The intra-EAC agricultural exports depended on various factors, including GDP of exporter, GDP of the importer, Exchange rate, distance between the economic centres, language similarities, adjacency and population of the exporter. EAC regionalism had no significant effect on agricultural exports of Burundi, Rwanda and Uganda, while Kenya and Tanzania had reported significant effect of regionalism on their agricultural exports. Furthermore, the study findings showed that there existed bi-directional relationship between agricultural exports and economic growth in Kenya, uni-directional relationship in Rwanda, and no relationship at all in Burundi, Tanzania and Uganda. EAC secretariat in collaboration with governments of EAC member states should enhance integration among the member states, as membership to EAC had significant effect on trade volumes for Kenya and Tanzania. EAC secretariat and respective governments in EAC should also reduce currency value disparities among the member states as a means of promoting intra-regional agricultural trade. The proposed monetary union and harmonization of currencies would significantly promote agricultural trade within the region. The EAC member states should also enhance border liberalization, as this will also promote intra-regional agricultural trade. Finally, to achieve and sustain high economic growth, Kenya and Rwanda governments should promote agricultural exports to both the EAC region and beyond, this is because empirical results show that a shock in agricultural exports for the two countries have a long run positive effects on their economic growth. This study concluded that EAC regional trade agreement has a potential of promoting EAC regional agricultural trade. Intra-EAC agricultural trade can still be improved and that the regional trade promotes economic growth in Kenya and Rwanda.
Agricultural trade and economic growth in East African Community, 2000 - 2012
(Kenyatta University, 2015-03) Ouma, Duncan O.
Agricultural activities contribute about 33% of the East African Community‟s Gross Domestic Product (World Bank, 2009), 80 per cent of the populace depend on agriculture directly and indirectly for food, employment and income, while about 40 million people in EAC suffer from hunger. Intra-EAC trade is very low, that is, at 9 per cent of the total regional trade, but it is on upward trend. Agricultural trade accounts for over 40 per cent of the intra-EAC trade. This study investigated the causes of intra-EAC agricultural trade, effect of EAC regional trade agreement on the regions agricultural trade by analyzing the degree of trade creation and diversion effects, and examined relationship of the regional agricultural trade with the region‟s economic growth. Several Augmented gravity models were estimated using the Pseudo Poisson Maximum Likelihood (PPML) Approach. Several bi-variate Vector Auto-Regressive (VAR) and Vector Error Correction (VEC) models were also estimated. Granger causality test and Impulse response analysis on trade and economic growth were performed using panel data from UNCOMTRADE, International Financial Statistics and World Development Indicators for the period 2000 – 2012 on the five EAC members and other 77 trade partners. The empirical findings showed mixed results for the different EAC member states. The intra-EAC agricultural exports depended on various factors, including GDP of exporter, GDP of the importer, Exchange rate, distance between the economic centres, language similarities, adjacency and population of the exporter. EAC regionalism had no significant effect on agricultural exports of Burundi, Rwanda and Uganda, while Kenya and Tanzania had reported significant effect of regionalism on their agricultural exports. Furthermore, the study findings showed that there existed bi-directional relationship between agricultural exports and economic growth in Kenya, uni-directional relationship in Rwanda, and no relationship at all in Burundi, Tanzania and Uganda. EAC secretariat in collaboration with governments of EAC member states should enhance integration among the member states, as membership to EAC had significant effect on trade volumes for Kenya and Tanzania. EAC secretariat and respective governments in EAC should also reduce currency value disparities among the member states as a means of promoting intra-regional agricultural trade. The proposed monetary union and harmonization of currencies would significantly promote agricultural trade within the region. The EAC member states should also enhance border liberalization, as this will also promote intra-regional agricultural trade. Finally, to achieve and sustain high economic growth, Kenya and Rwanda governments should promote agricultural exports to both the EAC region and beyond, this is because empirical results show that a shock in agricultural exports for the two countries have a long run positive effects on their economic growth. This study concluded that EAC regional trade agreement has a potential of promoting EAC regional agricultural trade. Intra-EAC agricultural trade can still be improved and that the regional trade promotes economic growth in Kenya and Rwanda.

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