African lions_ tapping the potential of kenya’s economic growth _ brookings institution

The age makeup of Kenya is changing, note Kimenyi et al., creating the potential for a demographic dividend—creating a larger working-age population compared to a dependent (young or retired) population and leading to growth in the supply of productive workforce—if policymakers can successfully prepare for and take advantage of its youth bulge.

Indeed, the youth bulge (and thus opportunity that comes with it) is there: Kenya’s birth rates have rapidly declined while mortality rates have dropped significantly too. Trade off economics definition In 2014, the dependent population was 44.75 percent (20.4 million) of the total population, while the working-age population was larger, at 55.25 percent (25.2 million). Free trade economics definition The cohort of the population aged 0-14 is the largest now, and as its members move into the “youth” age group—and become working age—they will greatly increase the gap between the working-age and dependent populations (see Figure 1). Trade and industry definition This phenomenon provides a great opportunity as the number of working-age people will vastly surpass that of the dependents, allowing working-age people to “accumulate savings and increase investment in the economy,” say the authors. What is trade finance definition Figure 1: Trends in Kenya’s working-age and dependent population

This potential boom to the economy carries along two caveats: First, the advantages cannot be utilized if there are not policies in place to create jobs for this massive influx of potential employees into the job market and educational systems to provide them with the skills to be hired. Barriers to trade definition In addition, the authors warn, there must be a “quality institutional environment,” that promotes the rule of law, bureaucratic efficiency, low corruption, freedom of speech, and good infrastructure, among many others. Trade investment means They also argue that the devolution in Kenya’s 2010 Constitution and recent reforms in public service, the judiciary, and the electoral system are strengthening its institutions and are putting the country well on its way. Definition of domestic trade Second, the population will not be able to achieve its full potential without government investments in education and training, which the authors discuss more fully in the paper.

Kenya has a particular advantage when it comes to its middle class—(defined by the African Development Bank as those who spend between $2 and $20 a day or earn an annual income exceeding $3,900)—which is 44.9 percent of its population, proportionally the largest in the East African region. Definition of terms of trade The region itself averages only 22.6 percent and the second-largest is Uganda, at 18.7 percent. Fair trade definition ap human geography According to the authors, this middle class emergence “presents an opportunity for social and economic growth in Kenya since the middle class has been argued to play a key role as a conduit for advancing social progress, an agent of change for institutional reforms, and a catalyst for the realization of inclusive growth, innovation, and entrepreneurial drive.” In particular, say the authors, through its large purchasing power, the rise of the middle class contributes to the retail sector, raises demand for housing, increases consumption overall, drives entrepreneurship and innovation, and draws in investors (both foreign and domestic).

Since, as the authors say, “Increased urbanization and expanding cities have been shown to increase economic growth. Trade off economic definition Kenya, which is quickly urbanizing, is presented with another opportunity to spur economic growth. Trade economy definition Kenya’s urban population is projected to reach 32.83 percent of its population by 2030—up from 25.5 percent in 2014. Trade corridor definition Nairobi is already one of the biggest cities on the continent, set to meet the 10 million person “mega-city” definition in a few decades. Definition of a trade school While the majority of people still live in rural areas, the city population growth will create demands for urban infrastructure, putting pressure on already over-utilized systems.” They emphasize that expected economic growth will happen only if urbanization is “accompanied with enhanced infrastructural development and decongestion of the urban areas.”

Increased urbanization comes hand in hand with a large labor supply. What is fair trade definition Without the creation of formal jobs, residents instead turn to informal ones—a trend already occurring in Kenya. Wholesale trade industry definition Notably, the number of informally employed persons has soared over the last few decades, overtaking formal employment in 1994 (Table 1). Trade in services definition The authors attribute this growth trend to the government’s market and trade liberalization policies, and the failure of the formal sector to create jobs. World trade patterns definition While the increase in the informal sector does signify that Kenyans are finding opportunities for income, the trend raises questions about its sustainability and benefits for the country. Traditional trade definition In particular, informal businesses struggle to expand and absorb more labor, are less productive, pay lower wages on average, and workers are not usually entitled to benefits, such as medical, leave, or pensions. Trade accounts payable definition As the authors state, “The informal sector is a reservoir of self-employed, unemployed, and underemployed and so may have a weak relationship to economic growth.” The authors suggest, then, that the focus should be on how to make the informal sector more dynamic while at the same time seeking to make it easier to do business in the formal sector—largely through capital accumulation. Definition of trade in economics Table 1: Shares of Kenya’s total employment (1985–2014)

Thus, without consistent job creation—especially in the formal sector—Kenya will struggle to create demographic dividend and further drive growth. What is the definition of trade barriers In creating jobs, though, the authors note that, so far, Kenya’s policies “have consistently promoted economic growth as the panacea to employment creation.” It seems that more targeted interventions are needed to encourage the private sector to create formal jobs. Definition of trademark As discussed above, employment in Kenya is headed toward the informal sector—indicating that Kenya’s employment responsiveness to growth in GDP is low. Definition of local trade In fact, in 2014, every 1 percentage point increase in GDP would create only a 0.56 percentage point increase in employment. Trade goods definition For a country with a youth bulge on the way, this is simply not enough.

In addition, despite the country’s growth, overall unemployment has not been falling—largely attributed to the growth in working-age population. What is trade definition Then again, wage employment, unlike informal employment, does seem to follow the country’s growth, as seen in Figure 3.

As with unemployment, it seems that Kenya’s growth has not been pro-poor. Trade relations definition Though Kenya doubled its GDP between 2005/06 and 2013, its poverty rate increased at the same time (Table 2). Definition of fair trade act According to the authors, “For employment-intensive growth to translate into poverty reduction it must occur in a ‘more productive’ sector, while ‘less productive’ sectors may require productivity-intensive growth to ensure a decline in head count poverty (Hull 2009).” In addition, the agriculture and construction sectors play a big part in reducing poverty as the poor most often are in rural or urban informal sectors.

In their paper Kimenyi et al. The definition of trade off review a number of trends in Kenya’s demographics, growth, and employment, finding that Kenya’s growth, while robust, has still been harnessed with lower economic outcomes and a failure to reach economic transformation so far. Definition of foreign trade policy However, the authors argue that many of the opportunities have not yet passed by and new ones—especially the demographic dividend—will soon be here. Triangular trade system definition Thus, the authors recommend the following.

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