The Effect of Public Investment on Private Investment in Kenya
Gideon Mukui *
Department of Economics and Development Studies, University of Nairobi, Nairobi, Kenya.
Japheth Awiti
Department of Economics and Development Studies, University of Nairobi, Nairobi, Kenya.
Joseph Onjala
Department of Economics and Development Studies, University of Nairobi, Nairobi, Kenya.
*Author to whom correspondence should be addressed.
Abstract
Public investment largely influences the socio-economic development of a country despite inefficiency concerns. A strong private sector is poised to cause GDP growth due to the efficient management of the resources compared to an economy dominated by the public sector. Nevertheless, public spending pattern influences socio-economic economic activities and welfare dynamics of a country. However, high levels of government activities could crowd-out private investment due to the competition for the scarce financial resources in the economy. This paper sought to analyze the effect of public investment on private investment in Kenya using a vector error correction model. The findings showed a strong positive impact of public investment on private investment in Kenya.
Keywords: Public investment, private investment, vector error correction model