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What determines the long run growth rate in Kenya?

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  • Kumar, Saten
  • Pacheco, Gail

Abstract

This paper examines the determinants of total factor productivity (TFP) in Kenya. We utilized the theoretical insights from the Solow (1956) growth model and its extension by Mankiw, Romer and Weil (1992) and followed Senhadji's (2000) growth accounting procedure. We find that growth in Kenya, until the 1990s was mainly due to factor accumulation. Since then, TFP has made a small contribution to growth. Our findings imply that while variables like overseas development aid, foreign direct investment and progress of financial sector improves TFP, trade openness is the key determinant. Consequently, policy makers should focus on policies that improve trade openness if the long run growth rate is to be raised.

Suggested Citation

  • Kumar, Saten & Pacheco, Gail, 2012. "What determines the long run growth rate in Kenya?," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 705-718.
    • Handle: RePEc:eee:jpolmo:v:34:y:2012:i:5:p:705-718
    DOI: 10.1016/j.jpolmod.2012.01.009
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    More about this item

    Keywords

    Solow model; Growth accounting; Total factor productivity; Trade openness;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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