IDEAS home Printed from
   My bibliography  Save this article

What determines the long run growth rate in Kenya?


  • Kumar, Saten
  • Pacheco, Gail


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

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Rao, B. Bhaskara, 2010. "Estimates of the steady state growth rates for selected Asian countries with an extended Solow model," Economic Modelling, Elsevier, vol. 27(1), pages 46-53, January.
    3. De Vita, G. & Endresen, K. & Hunt, L.C., 2006. "An empirical analysis of energy demand in Namibia," Energy Policy, Elsevier, vol. 34(18), pages 3447-3463, December.
    4. Salinas-Jimenez, M Mar & Alvarez-Ayuso, Inmaculada & Delgado-Rodriguez, M Jesus, 2006. "Capital accumulation and TFP growth in the EU: A production frontier approach," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 195-205, February.
    5. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 99-125.
    6. B. Bhaskara Rao, 2007. "Estimating short and long-run relationships: a guide for the applied economist," Applied Economics, Taylor & Francis Journals, vol. 39(13), pages 1613-1625.
    7. López-Pueyo, Carmen & Mancebón, María-Jesús, 2010. "Innovation, accumulation and assimilation: Three sources of productivity growth in ICT industries," Journal of Policy Modeling, Elsevier, vol. 32(2), pages 268-285, March.
    8. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
    9. Salvatore, Dominick, 2008. "Growth, productivity and compensation in the United States and in the other G-7 countries," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 627-631.
    10. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    11. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2003. "Government expenditures, military spending and economic growth: causality evidence from Egypt, Israel, and Syria," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 567-583, September.
    12. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    13. Duval, Romain & de la Maisonneuve, Christine, 2010. "Long-run growth scenarios for the world economy," Journal of Policy Modeling, Elsevier, vol. 32(1), pages 64-80, January.
    14. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    15. B. Bhaskara Rao, 2010. "Time-series econometrics of growth-models: a guide for applied economists," Applied Economics, Taylor & Francis Journals, vol. 42(1), pages 73-86.
    16. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    17. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    18. B. Bhaskara Rao & Saten Kumar, 2011. "Is the US demand for money unstable?," Applied Financial Economics, Taylor & Francis Journals, vol. 21(17), pages 1263-1272.
    19. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    20. B. Bhaskara Rao & Rup Singh & Saten Kumar, 2010. "Do we need time series econometrics?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(7), pages 695-697.
    21. Rao, B. Bhaskara & Tamazian, Artur, 2008. "A model of growth and finance: FIML estimates for India," MPRA Paper 8763, University Library of Munich, Germany.
    22. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    23. Rao, B. Bhaskara & Vadlamannati, Krishna Chaitanya, 2011. "Globalization and growth in the low income African countries with the extreme bounds analysis," Economic Modelling, Elsevier, vol. 28(3), pages 795-805, May.
    24. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    25. Feldstein, Martin, 2008. "Did wages reflect growth in productivity?," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 591-594.
    26. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    27. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 112-135, March.
    28. Abdelhak Senhadji, 2000. "Sources of Economic Growth: An Extensive Growth Accounting Exercise," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 1-6.
    29. Feldstein, Martin, 2008. "Did Wages Reflect Growth in Productivity?," Scholarly Articles 2794832, Harvard University Department of Economics.
    30. Oduor, Jacob & Karingi, Stephen & Mwaura, Stephen, 2011. "Efficiency of financial market intermediation in Kenya: A comparative analysis," Journal of Policy Modeling, Elsevier, vol. 33(2), pages 226-240, March.
    31. Adams, Samuel, 2009. "Foreign Direct investment, domestic investment, and economic growth in Sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 939-949, November.
    32. Oketch, Moses O., 2006. "Determinants of human capital formation and economic growth of African countries," Economics of Education Review, Elsevier, vol. 25(5), pages 554-564, October.
    33. Lipow, Jonathan & Antinori, Camille M., 1995. "External security threats, defense expenditures, and the economic growth of less-developed countries," Journal of Policy Modeling, Elsevier, vol. 17(6), pages 579-595, December.
    34. Arndt, Channing, 2006. "HIV/AIDS, human capital, and economic growth prospects for Mozambique," Journal of Policy Modeling, Elsevier, vol. 28(5), pages 477-489, July.
    35. Odhiambo, Nicholas M., 2009. "Savings and economic growth in South Africa: A multivariate causality test," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 708-718, September.
    36. Dar, Atul A. & AmirKhalkhali, Sal, 2002. "Government size, factor accumulation, and economic growth: evidence from OECD countries," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 679-692, November.
    37. B. Bhaskara Rao & Gazi Mainul Hassan, 2012. "An analysis of the determinants of the long-run growth rate of Bangladesh," Applied Economics, Taylor & Francis Journals, vol. 44(5), pages 565-580, February.
    38. B. Bhaskara Rao & Maheshwar Rao, 2009. "Openness and growth in Fiji: some time series evidence," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1653-1662.
    39. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ousama Ben-Salha & Maamar Sebri, 2014. "A multivariate analysis of the causal flow between renewable energy consumption and GDP in Tunisia," Economics Bulletin, AccessEcon, vol. 34(4), pages 2396-2410.
    2. Michael Donadelli & Vahid Mojtahed & Antonio Paradiso, 2015. "Technological Progress, Investment Frictions and Business Cycle: New Insights from a Neoclassical Growth Model," Working Papers LuissLab 15119, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    3. Aamer S. Abu-Qarn, 2016. "A Reassessment Of The Proximate Determinants Of Income Levels And Growth Of Nations," Working Papers 1609, Ben-Gurion University of the Negev, Department of Economics.
    4. Cooray, Arusha & Paradiso, Antonio & Truglia, Francesco Giovanni, 2013. "Do countries belonging to the same region suggest the same growth enhancing variables? Evidence from selected South Asian countries," Economic Modelling, Elsevier, vol. 33(C), pages 772-779.
    5. Eléazar Zerbo, 2015. "What determines the long-run growth in Sub-Saharan Africa? Exploring the role of energy, trade openness and financial development in six countries," Working Papers hal-01238524, HAL.

    More about this item


    Solow model; Growth accounting; Total factor productivity; Trade openness;

    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


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:34:y:2012:i:5:p:705-718. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.