The Effect of Rule of Law on Total Factor Productivity in Kenya
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Date
2023
Journal Title
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Publisher
Iosr Journal of Economics and Finance (Iosr-Jef).
Abstract
Economies across the globe have witnessed wide variations in incomes, inviting researchers and policy makers to explore various interventions to bridge the gap. Among the interventions floated is focusing more on productivity levels than the accumulation of inputs. Total Factor Productivity, defined as a measure of output growth not explained by factor inputs, has been fronted as the solution to the widespread variations. Kenya targets achieving an annual Total Factor Productivity growth rate of 2.5 from the current 0.352 to achieve vision 2030 and Sustainable Development Goals. One way to increase Total Factor Productivity is by creating an enabling and conducive environment where factor inputs operate. Institutions, specifically the Rule of Law, play a vital role in ensuring a thriving environment. This study, therefore, sought to establish how the Rule of Law affects Total Factor Productivity in Kenya both in the short run and in the long run. The study adopted an Auto Regressive Distributed Lag Model with an error correction term, which was informed by the presence of co-integration relationships as established by the ARDL bound test. The study utilized a time series data set for the period 1996 to 2020, obtained from secondary sources. The ARDL bound test for co-integration was employed since variables were found to be of mixed series. The study found a positive long-run relationship and a negative short-run relationship between the Rule of Law and Total Factor Productivity in Kenya. Consequently, the study recommended that the government of Kenya should provide both technical and budgetary support to those institutions that promote the entrenchment, adherence and upholding of Rule of Law as one of the ways of improving TFP levels.
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Citation
Munigai, P.M. & Mwilaria, S.M. (2023). The Effect of Rule of Law on Total Factor Productivity in Kenya. Iosr Journal of Economics and Finance (Iosr-Jef).