Effect of Total Factor Productivity on Economic Growth in Kenya:An Empirical Analysis
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 6
Abstract
The purpose of the study was to build a model to explain the effect of Total Factor Productivity on economic growth in Kenya for the period 1970-2015 after accounting for labour and capital productivity. ARDL bounds test of co-integration is employed and the Error Correction Model reveals that the Total Factor Productivity Components of Foreign Aid and Financial Development have insignificant effect on economic growth and null hypotheses are accepted, while Foreign Direct Investment has significant effect on Economic Growth and the null hypothesis is rejected. The significant Error Correction Terms reveal multidirectional causality between Foreign Direct Investment, Economic Growth and Foreign Aid while there is unidirectional causality between Economic Growth, Foreign Direct Investment, Foreign Aid and Financial Development. A robustness check is then carried out to determine the consistency of the ARDL findings using the Johansen test of co-integration, vector error correction model (VECM) and post estimation tests. The findings reveal consistency in the Error correction terms with (-.91) for ARDL and (-.87) for VECM. The orthogonalized impulse response functions show the effect of permanent and insignificant shocks for the variables. In conclusion to realise significant effect of the Total Factor Productivity components on Economic Growth, the recommended policy actions are to improve governance through public and private sector reforms and reinforce the powers of agencies such as the Ethics and Anti-corruption Commission (EACC), implement structural and economic reforms, lower transaction costs to businesses, and to improve policies for the adoption of technology.
Authors and Affiliations
beatrice Wekhe Misorimaligayo, Christine Nanjala Simiyu
Keywords
Related Articles
- EP ID EP422781
- DOI 10.9790/5933-0906020123.
- Views 174
- Downloads 0
Modelling LKR/USD Exchange Rate Volatility: GARCH Approach
Exchange Rate Volatility is a most prominent term in the financial econometrics. This Study aimed to estimate the changes in volatility of exchange rates focused on LKR/USD for the period of January 2000 to August 2018....
African Diaspora and Structural Economic Transformation of Africa: Lessons from Asia
Income levels tend to converge across different regions through the diffusion of technology and productivity. Asian economies are closing income gap between them and high income countries, African economies are not. The...
Frugal Innovation: An Opportunity for Developing Countries?
Developing countries, in terms of the knowledge and knowledge economy, they have difficulties in catching up with developed countries (Foray, 2009; El Mouhoud, 2011). The reasons which explain these difficulties are nume...
Analysis of Environmental Culture for Sustainable Beaches San Vicente Canton
The purpose of this paper is to investigate on the Environmental Culture on the beaches of the canton of San Vicente. Through the statistical software REDATAM was considered the variables UR (Urban and Rural) to define p...
Extensive Tobacco Cultivation in Kushtia District of Bangladesh: Changes in Cultivators’ Perception Regarding External Cost
This paper aims at exploring whether tobacco growers receive positive marginal social benefit than the marginal social cost they incur from extensive tobacco cultivation in rural areas of Bangladesh. This study uses prim...