Effects of Governance on Economic Growth in Kenya: 1997-2022

Abstract

Purpose: The primary objective of the study was to evaluate the impact of governance on economic growth in Kenya. Specifically, the study examined the influence of government effectiveness, control of corruption, political stability, and accountability on the country’s economic performance.

Methodology: The study was grounded in the Solow Growth Theory, Endogenous Growth Theory, and New Growth Theory, which collectively explain the drivers of long-term economic development. A time series research design was employed, utilizing data covering a 25-year period from 1997 to 2022. This design facilitated an assessment of both short-term and long-term relationships. The data on governance indicators and economic growth were sourced from the World Bank’s official databases, ensuring accuracy and consistency. Statistical analyses were conducted to determine the extent and significance of the relationships among the study variables.

Findings:  The empirical results revealed that both government effectiveness and control of corruption had a positive and statistically significant effect on Kenya’s economic growth, underscoring the importance of strong institutions and transparent governance. Conversely, voice and accountability exhibited a negative and statistically significant relationship with economic growth, suggesting potential short-term disruptions associated with participatory governance reforms. Political stability, while negative, did not have a statistically significant effect on economic growth.

Conclusion: The study concludes that effective governance, characterized by institutional efficiency and anti-corruption measures, is essential for promoting economic development in Kenya. However, increased citizen participation and accountability mechanisms may initially create transitional challenges that temporarily affect growth dynamics.

Value: This study provides empirical evidence on the complex interaction between governance quality and economic performance in emerging economies. It offers critical policy recommendations, emphasizing the need for Kenyan policymakers to strengthen institutional effectiveness, reinforce anti-corruption frameworks, and balance accountability initiatives with policies that support macroeconomic stability and sustainable growth.