Economics

Permanent URI for this collectionhttps://repository.chuka.ac.ke/handle/123456789/22516

Browse

Browsing Economics by Subject "Autoregressive Distributed Lag (ARDL) model"

Filter results by typing the first few letters
Now showing 1 - 2 of 2
  • Thumbnail Image
    Item
    Effect of government’s human capital expenditure on poverty rates in Kenya
    (Chuka University, 2025) Musee, Amos Mutambu
    Poverty remains a significant socio-economic challenge in Kenya, with approximately 36 percent of the population living below the international poverty line of $2.15 per day despite substantial government investments in human capital. This study utilized a causal research design to investigate the effect of government expenditure on education, health, and technology on poverty rates in Kenya from 1975 to 2024. Employing an Autoregressive Distributed Lag model, the study analyzed both short-run and long-run relationships, using secondary data from the Kenya National Bureau of Statistics and the World Development Indicators, with the Stata software used for the econometric analysis. The findings revealed a stable long-run cointegrating relationship among the variables as confirmed by the Autoregressive Distributed Lag Bounds Test. The error correction term was statistically significant at the 1 percent level, indicating a moderate speed of adjustment, with over half of short-run deviations in poverty levels corrected each year. The findings further revealed that government expenditure on education had a statistically significant poverty-reducing effect in both the long run and the short run, significant at the 1 percent and 10 percent levels respectively. Similarly, government expenditure on health demonstrated a strong and statistically significant povertyreducing impact in both the long run and the short run, each significant at the 1 percent level. In contrast, government expenditure on technology and innovation was statistically insignificant in both the short run and the long run. Overall, the model exhibited strong explanatory power with a high goodness of fit. These results underscore that increased investments in education and health significantly contribute to poverty reduction in Kenya, guiding targeted policy formulation for efficient resource allocation. Based on these findings, the study recommends enhancing both the scale and quality of government expenditures in education and health to sustain and deepen their poverty-reducing impact. Its further advocates for a strategic reorientation of technology expenditure to prioritize digital inclusivity and its integration into essential services like education and healthcare. The study also highlights areas for further study on optimizing human capital spending, particularly in the technology sector, to ensure inclusive effect on poverty alleviation.
  • Thumbnail Image
    Item
    Effect of health sector expenditures on poverty rates in Kenya
    (Chuka University, 2025-10) Bett Gidion
    Governments aim to provide sufficient health coverage to maintain a healthy population, which is vital for economic productivity. Kenya government's financial commitment remains significantly low, averaging only 4.3% of Gross Domestic Product, well below the 15% target set by the Abuja Declaration. Adding to this challenge, external health aid, a key component of Kenya's health financing, has steadily declined since 1993. With rising population growth pressure, the low-income population suffers from high medication costs, out-of-pocket health expenses, and risks sliding or remaining in poverty due to increased healthcare costs and noncommunicable diseases. Data shows that about 36% of Kenyans live below the poverty line, with rural areas being more affected. Moreover, around one million Kenyans fall into poverty each year because of healthcare costs, worsened by the high prevalence of diseases such as cancer, HIV/AIDS, malaria, and tuberculosis. Empirical studies on Kenya have not substantially covered the link between persistent poverty rates and sectoral health expenditure. Additionally, most of the existing studies concentrate on out-of-pocket spending on healthcare. It is against this backdrop that this study sought to determine the impact of domestic, external, and private health expenditures on poverty rates in Kenya. The study was guided by the Keynesian theory of poverty and Grossman's theory of human capital. The study employed a causal research design and time series data from the World Bank, Kenya National Bureau of Statistics, and the Kenya Ministry of Health’s Annual Health Reports from 1990 to 2024. Autoregressive Distributed Lag Model was employed in the research to account for both short term dynamics in the economy and the long run impacts of the health sector expenditures on poverty. Error correction model and bound test was used to measure the spend of readjustment to normal in case of economic shocks hence ensure smooth the study the dynamic relationship between various health sector expenditures and poverty rates in Kenya. Cointegration was confirmed using the Bounds Test, leading to the reparameterization of the ARDL model into an Error Correction Model (ECM). The ECM captures both the short-run dynamics and the speed of adjustment toward the long-run equilibrium. According to the findings, government health expenditure demonstrated a statistically significant negative effect both in the long run and the short run. Private health expenditure had a statistically significant negative relationship with poverty rates, in the long run, while in the short run, it had a positive and significant effect. Conversely, external health expenditure showed a significant negative coefficient in the long run. The consistently strong and negative long-run coefficients for government health expenditure, external health expenditure, and private health expenditure unequivocally demonstrate that each component plays a significant role in reducing poverty rates. The research significantly provides insightful knowledge on the interplay of the health sub sectors in Kenya towards poverty alleviation. Both private sector, and government finds this research as a bedrock for reevaluation of health expenditures and need for preventive measure for both communicable and non-communicable diseases which has caused catastrophic spending that push individuals to poverty. Based on the findings, the main recommendation for Kenyan policymakers is to sustain and strategically increase public health expenditure, promote private firms, faith based organization and good partnership with international donors. This helps to reduce out of pocket spending. As well there is a need for true education on the principles of healthful living which is key input for productivity and efficiency in the economy.