Human Capital Development, Official Development Assistance and Sectoral Economic Growth in Kenya
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Date
2022
Authors
Mwithiga, Julie Mumbi
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
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.
Description
A Research Project Submitted to the School of Economics in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Economics (Policy and Management) Of Kenyatta University, May 2022
Keywords
Human Capital Development, Official Development Assistance, Sectoral Economic Growth, Kenya