Disaggregated Government Expenditure and Manufacturing Sector Performance in Kenya
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Date
2024-03
Authors
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Publisher
Kenyatta University
Abstract
Manufacturing sector is a key sector that promote development through; contribution to Gross Domestic Product, employment generation, value addition, diversification, industrialization and technological innovations. The government has spent significant amount resources to boost the growth of the manufacturing sector. The need for growth in this sector picked momentum in the early 60s. Policies like: the Import substitution in 1963; National development plan in 1970; Structural Adjustment Programs in the 80s; the Vision 2030 in 2008 and the Big Four Agenda in 2017, as well as increased government expenditure in the sector have been implemented to spur performance in the sector. Despite the policy implications and increased disaggregated government expenditure, the conduct of the manufacturing sector as shown by its value added experienced significant growth in the initial three decades after independence, after which it plateaued to 9 percent. It is against this backdrop that the research aimed to uncover the effects of disaggregated government spending in manufacturing sector on manufacturing sector performance in Kenya. The specific objectives of the study were to: determine the effect of government’s recurrent expenditure in manufacturing sector on the sector’s performance in Kenya, determine the effects of government’s development expenditure in manufacturing sector on the sector’s performance in Kenya and to determine the impact of total government expenditure in manufacturing sector on the sector’s performance in Kenya. The study used time series data from 1984 to 2021 for selected variables namely government recurrent and development expenditures in manufacturing sector, interest rates, inflation, exchange rates, Gross Domestic Product and manufacturing value added. An Auto Regressive Distributed Lag Error Correction Model was used to determine short run and long run relationship between variables after appropriate time series test were conducted. The study found a positive relationship between disaggregated government expenditure and manufacturing sector performance. The study therefore recommended that, to achieve a rapid economic growth and sustainable development through the Kenya manufacturing sector, the government of Kenya should optimally allocate expenditure to the sector
Description
A Research Project Submitted to the Department of Econometrics in the School of Business, Economics and Tourism in Partial Fullfillment of the Requirments for the Award of the Degree of Masters of Economics (Econometrics), Kenyatta University, March 2024.
Supervisor
Susan O. Okeri