Effect of Public Wages on External Debt in Kenya

Remmy Juma Naibei; Dennis Muriithi; Onesmus Mbaabu

doi:doi:10.11648/j.sr.20241205.12

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Effect of Public Wages on External Debt in Kenya

Remmy Juma Naibei, Dennis Muriithi^*, Onesmus Mbaabu^*

Published in Science Research (Volume 12, Issue 5)

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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[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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[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.
[23]	Wray, L. R. (2009). An alternative view of finance, saving, deficits, and liquidity. International Journal of Political Economy, 38(4), 25-43.

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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
Y1  - 2024/09/29
PY  - 2024
N1  - https://doi.org/10.11648/j.sr.20241205.12
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

Remmy Juma Naibei

Department of Social Sciences, Chuka University, Chuka, Kenya

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Dennis Muriithi

Department of Physical Sciences, Chuka University, Chuka, Kenya

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Onesmus Mbaabu

Department of Social Sciences, Chuka University, Chuka, Kenya

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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

Copy | Download

@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
Y1  - 2024/09/29
PY  - 2024
N1  - https://doi.org/10.11648/j.sr.20241205.12
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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