Impact of Infrastructure Development on Economic Competitiveness in Kenya

Abstract

The main aim of this paper is to investigate how infrastructure development impacts on economic competitiveness of Kenya, taking into account selected lower middle income countries. This study was motivated by two main factors. First, the Kenya Economic Blueprint - the Vision 2030 identifies infrastructure development among the key drivers towards achieving shared prosperity in Kenya by 2030. Secondly, understanding the impact of infrastructure development on the economy can go a long way into enhancing proper forward looking policy. Most of the empirical work in Kenya focussing on infrastructure development are limited to certain geographical jurisdiction and specific sectors. This paper therefore sought to include four sectors of infrastructure to determine how they conduce to economic competitiveness of Kenya. A variant form of Isaack Newton’s gravity model is applied using panel data running from 2000 to 2013. A Haussmann test suggested that fixed effects frame work was preferred to random effects model. The results indicated that transport and energy infrastructure to be positive and significant in driving economic competitiveness of Kenya while ICT and Water and Sanitation were found to be insignificant. Further, GDP and labour force which were considered as control variables were found to be imperative in determining economic competitiveness of Kenya.