Total factor productivity in Kenya: The links with trade policy
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Date
2020-04-27
Authors
Onjala, Joseph O.
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
As an objective of development policy, productivity growth has been difficult to achieve
in many countries. For this reason, studies on sources of growth are a field of great
importance to policy makers. Recent experience, particularly for East Asian countries,
has highlighted the potential for achieving rapid and renewed growth in sub-Saharan
Africa through appropriate trade policy orientation. In Kenya, however, where the last
three decades have seen attempts to foster growth through shifts in trade policy orientation,
convincing evidence on the linkage between trade strategies and productivity growth is
still lacking.
This study explores productivity sources in the manufacturing and agricultural
sectors using aggregated data over 1960–1995. Productivity is explained by: growth by
factor inputs, and change in total factor productivity. Agriculture is seen as a dynamic
sector producing important linkages with the growth of other sectors. The manufacturing
sector, on the other hand, is important in growth-oriented analysis, which generally
perceives it as crucial for increasing the rate of growth for the whole economy. The study
establishes the direction of the links between TFP change in these sectors with trade
policy episodes such as imports, export penetration and trade volume.
Nevertheless, the impact of trade policy on productivity remains inconclusive.
Evidence suggests that more robust results with broader policy consensus could be obtained
if the analysis were extended to a disaggregated level for each of the sectors.