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What Determines the Long run Growth in Kenya?

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  • Saten Kumar
  • Gail Pacheco

Abstract

Lifting the long run growth rate is, arguably, the pursuit of every economy. What should Kenya do to enhance its long run growth rate? This paper attempts to answer this question by examining 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 long run growth rate is to be raised.

Suggested Citation

  • Saten Kumar & Gail Pacheco, 2010. "What Determines the Long run Growth in Kenya?," EERI Research Paper Series EERI_RP_2010_16, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2010_16
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    More about this item

    Keywords

    Solow model; growth accounting; total factor productivity.;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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