Research Article | | Peer-Reviewed

Effect of Public Wages on External Debt in Kenya

Received: 30 August 2024     Accepted: 18 September 2024     Published: 29 September 2024
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Abstract

Most developing Africa countries have a high need for capital projects that requires a lot of government spending and attention. However, it is unfortunate that in Kenya, borrowed cash intended for capital projects is diverted to recurrent requirements putting a damper on national investment in viable projects. This poses a significant threat to the economy's growth. The following goal served as a guideline for the study; to determine the influence of public wages on external borrowing debt in Kenya using both cointegration and error correction model. Causal research design was adopted to explain the influence of public wages on external borrowing in Kenya. The study period was from 1970 and 2019 from which a 50-year time series data was employed for analysis. The research relied on secondary data which was collected with the aid of a structured data collection checklist from Central Bank of Kenya, and Kenya National Bureau of Statistics, and World Bank websites. Data analysis was done with an aid of stata, E-views and Ox-Metrics statistical software. Stationarity of variables was tested using PP unit root test where public wages was reported to be stationary at level form. The study employed the use of Ordinary Least Square (OLS) technique in the analysis. There was a significant negative association between public wages and external debt whereby a rise in public wage by 100% indicated decrease in external debt by 101.92%. The overall model was found to be significant since the F-statistic value generated in the analysis was 124.664 with a p-value of 0.000 < 0.05. Model was a good predictor of external borrowing, with an adjusted R2 of 0.946 for public wages explaining foreign debt. This research recommends the study recommends that SRC should free up resources using the austerity measures which include wage reductions for government employees. Secondly, the government through the ministry of treasury should raise tax base to increase revenues. Finally, the results of this study may be valuable to government stakeholders who are charged with the responsibility of ensuring economic development through public sector financing, also it is expected to provide important information to policymakers in order to maintain external debt at manageable levels.

Published in Science Research (Volume 12, Issue 5)
DOI 10.11648/j.sr.20241205.12
Page(s) 109-116
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Public Wages, Error Correction Model, Gross Domestic Product, Vector Autoregressive, External Debt, Recurrent Expenditure

References
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[4] Cline, W. R. (1985). International debt: from crisis to recovery? The American Economic Review, 75(2), 185-190.
[5] Done, I. (2011). The Correlation between Wages and Labor Productivity-the Maximum Expression Synthesis of Economic Efficiency. Petroleum-Gas University of Ploiesti Bulletin, Technical Series, 63(4).
[6] Eaton, J. (1993). Sovereign debt: A primer. The World Bank Economic Review, 7(2), 137-172.
[7] Hartlyn, J. (2019). Latin American political economy: financial crisis and political change. Routledge.
[8] Holm-Hadulla (2010). Public wages in the euro area: towards securing stability and competitiveness. ECB Occasional Paper, (112).
[9] Krugmma, K. L. (1985). The external debt of sub-Saharan Africa: origins, magnitude, and implications for action (Vol. 735). World Bank.
[10] Mahdavi, S. (2004). Shifts in the composition of government spending in response to external debt burden. World Development, 32(7), 1139-1157.
[11] Maingi, J., & Thuku, G. K. (2013). The impact of public expenditure components on economic growth in Kenya 1964-2011. International Journal of business and social Science, 4(4).
[12] Muinga, R. M. (2014). External public debt and economic growth in Kenya (Doctoral dissertation, University of Nairobi).
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[14] Origlia, A. (2018). An audiovisual corpus of guided tours in cultural sites: Data collection protocols in the chrome project. In 2018 AVI-CH Workshop on Advanced Visual Interfaces for Cultural Heritage (Vol. 2091, pp. 1-4).
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[17] Rais, S. I., & Anwar, T. (2012). Public debt and economic growth in Pakistan: A time series analysis from 1972 to 2010. Academic research international, 2(1), 535.
[18] Sala-i-Martin, X. X. (1997). The optimum quantity of money: Theory and evidence (No. w5954). National Bureau of Economic Research.
[19] Sharpe (2008). The relationship between labour productivity and real wage growth in Canada and OECD countries. Ottawa, Ontario: Centre for the Study of Living Standards.
[20] Shonchoy, A. S. (2010). Determinants of government consumption expenditure in developing countries: A panel data analysis. Institute of Developing Economies (IDE) Discussion Paper, 266.
[21] Soest, A., & Stancanelli, E. (2010). Does income taxation affect partners' household chores?
[22] Soludo, C. C. (Eds.). (2003). African voices on structural adjustment. Africa World Press.
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  • APA Style

    Naibei, R. J., Muriithi, D., Mbaabu, O. (2024). Effect of Public Wages on External Debt in Kenya. Science Research, 12(5), 109-116. https://doi.org/10.11648/j.sr.20241205.12

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    ACS Style

    Naibei, R. J.; Muriithi, D.; Mbaabu, O. Effect of Public Wages on External Debt in Kenya. Sci. Res. 2024, 12(5), 109-116. doi: 10.11648/j.sr.20241205.12

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    AMA Style

    Naibei RJ, Muriithi D, Mbaabu O. Effect of Public Wages on External Debt in Kenya. Sci Res. 2024;12(5):109-116. doi: 10.11648/j.sr.20241205.12

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  • @article{10.11648/j.sr.20241205.12,
      author = {Remmy Juma Naibei and Dennis Muriithi and Onesmus Mbaabu},
      title = {Effect of Public Wages on External Debt in Kenya
    },
      journal = {Science Research},
      volume = {12},
      number = {5},
      pages = {109-116},
      doi = {10.11648/j.sr.20241205.12},
      url = {https://doi.org/10.11648/j.sr.20241205.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sr.20241205.12},
      abstract = {Most developing Africa countries have a high need for capital projects that requires a lot of government spending and attention. However, it is unfortunate that in Kenya, borrowed cash intended for capital projects is diverted to recurrent requirements putting a damper on national investment in viable projects. This poses a significant threat to the economy's growth. The following goal served as a guideline for the study; to determine the influence of public wages on external borrowing debt in Kenya using both cointegration and error correction model. Causal research design was adopted to explain the influence of public wages on external borrowing in Kenya. The study period was from 1970 and 2019 from which a 50-year time series data was employed for analysis. The research relied on secondary data which was collected with the aid of a structured data collection checklist from Central Bank of Kenya, and Kenya National Bureau of Statistics, and World Bank websites. Data analysis was done with an aid of stata, E-views and Ox-Metrics statistical software. Stationarity of variables was tested using PP unit root test where public wages was reported to be stationary at level form. The study employed the use of Ordinary Least Square (OLS) technique in the analysis. There was a significant negative association between public wages and external debt whereby a rise in public wage by 100% indicated decrease in external debt by 101.92%. The overall model was found to be significant since the F-statistic value generated in the analysis was 124.664 with a p-value of 0.000 2 of 0.946 for public wages explaining foreign debt. This research recommends the study recommends that SRC should free up resources using the austerity measures which include wage reductions for government employees. Secondly, the government through the ministry of treasury should raise tax base to increase revenues. Finally, the results of this study may be valuable to government stakeholders who are charged with the responsibility of ensuring economic development through public sector financing, also it is expected to provide important information to policymakers in order to maintain external debt at manageable levels.
    },
     year = {2024}
    }
    

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  • TY  - JOUR
    T1  - Effect of Public Wages on External Debt in Kenya
    
    AU  - Remmy Juma Naibei
    AU  - Dennis Muriithi
    AU  - Onesmus Mbaabu
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    DO  - 10.11648/j.sr.20241205.12
    T2  - Science Research
    JF  - Science Research
    JO  - Science Research
    SP  - 109
    EP  - 116
    PB  - Science Publishing Group
    SN  - 2329-0927
    UR  - https://doi.org/10.11648/j.sr.20241205.12
    AB  - Most developing Africa countries have a high need for capital projects that requires a lot of government spending and attention. However, it is unfortunate that in Kenya, borrowed cash intended for capital projects is diverted to recurrent requirements putting a damper on national investment in viable projects. This poses a significant threat to the economy's growth. The following goal served as a guideline for the study; to determine the influence of public wages on external borrowing debt in Kenya using both cointegration and error correction model. Causal research design was adopted to explain the influence of public wages on external borrowing in Kenya. The study period was from 1970 and 2019 from which a 50-year time series data was employed for analysis. The research relied on secondary data which was collected with the aid of a structured data collection checklist from Central Bank of Kenya, and Kenya National Bureau of Statistics, and World Bank websites. Data analysis was done with an aid of stata, E-views and Ox-Metrics statistical software. Stationarity of variables was tested using PP unit root test where public wages was reported to be stationary at level form. The study employed the use of Ordinary Least Square (OLS) technique in the analysis. There was a significant negative association between public wages and external debt whereby a rise in public wage by 100% indicated decrease in external debt by 101.92%. The overall model was found to be significant since the F-statistic value generated in the analysis was 124.664 with a p-value of 0.000 2 of 0.946 for public wages explaining foreign debt. This research recommends the study recommends that SRC should free up resources using the austerity measures which include wage reductions for government employees. Secondly, the government through the ministry of treasury should raise tax base to increase revenues. Finally, the results of this study may be valuable to government stakeholders who are charged with the responsibility of ensuring economic development through public sector financing, also it is expected to provide important information to policymakers in order to maintain external debt at manageable levels.
    
    VL  - 12
    IS  - 5
    ER  - 

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Author Information
  • Department of Social Sciences, Chuka University, Chuka, Kenya

  • Department of Physical Sciences, Chuka University, Chuka, Kenya

  • Department of Social Sciences, Chuka University, Chuka, Kenya

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