Human Capital Development, Official Development Assistance and Sectoral Economic Growth in Kenya
Mwithiga, Julie Mumbi
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Kenya's economic performance has varied overtime; however, the individual share of leading sectors in Gross Domestic Product is still trifling. The broad-based growth option is that which incorporates total factor productivity among the main sectors of the economy and enables the economy to gain the desired positive structural change, wellbeing and sustainable economic growth. Upon conducting sectoral review, the Government of Kenya settled on the” Big Four” agenda which is anchored on key sectors that could lead to food security, affordable housing, increased share in Gross Domestic Product of manufacturing sector activities and affordable universal healthcare, in support of an economic growth that would result in alleviation of poverty and increased job opportunities for the youth. The government plans to increase resources to realize actual performance in these sectors under the Big Four Agenda and part of these resources is in form of official development assistance from bilateral and multilateral institutions. Shifting of public resources from administration to other sectors which are more productive significantly influence growth. However, this depicts different implications on the process of structural change. It is only through the shifting public resources towards spending on services and industry that may have the most positive significant effect on the process of structural change. Many studies on official development assistance and human capital development have focused on economic development from a national or cross-country perspective, but a few studies have looked at sectoral economic growth. Thus, this study examined how official development assistance and human capital development interact in Kenya's sectoral economies. This was achieved through three specific objectives; the first was to establish a causal relationship between official development assistance and human capital development in Kenya. The second was to determine the effect of human capital development on sectoral economic growth in Kenya. The third was to establish the effect of official development assistance on sectoral economic growth in Kenya. The study concentrated on agriculture and manufacturing since they were both key sectors under the economic pillar of the Kenya VISION 2030, as they are important drivers of economic development and account for a significant portion of the country's overall employment. Time series data analysis was used to look at these two sectors. The study, which covered the years 1980 through 2020, was completed by assessing each component on an annual basis and collecting secondary data from sources such as national statistical abstracts and economic surveys. As a result, it was found that official development assistance causes human capital development, indicating that the link is unidirectional in its origin. In addition, human capital development had a favorable effect on manufacturing economic growth, while official development assistance had a large and positive effect on both the agriculture and manufacturing sectors' economic growth. The findings had effect to both theory as well as policy in promoting human capital development as well as attract more official development assistance to the country. Based on the findings, the government at national and county government levels ought to acknowledge the significance of human resources by developing a framework that would steer forward the key human capital elements including allocating more funds to enable boosting a combination of associated factors. Moreover, reforms in public finance management such as restructuring, strengthening monitoring and evaluation systems, automation of payroll systems and improvement of audit procedures in public institutions, may renew the confidence of donors. Therefore, an accountability framework by Government may help mitigate obstacles such as high-level corruption and enhance more official development assistance inflows in Kenya.