International Journal of Social Science & Economic Research
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Mary Awuor Opondo, Prof. Martin N. Etyang', Dr. Susan Okeri, Dr Angelica Njuguna

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1Mary Awuor Opondo, 2Prof. Martin N. Etyang', 3Dr. Susan Okeri, 4Dr Angelica Njuguna
1. PhD Student, School of Economics, Kenyatta University
2. Department of Economic Theory, School of Economics, Kenyatta University
3,4. Department of Econometrics and Statistics, School of Economics, Kenyatta University

Opondo, Mary Awuor, et al. "THE EFFECT OF THE SIZE OF THE INFORMAL SECTOR ON ECONOMIC GROWTH IN KENYA (1974 TO 2016)." Int. j. of Social Science and Economic Research, vol. 4, no. 6, June 2019, pp. 4712-4727, Accessed June 2019.
Opondo, M., Etyang', P., Okeri, D., & Njuguna, D. (2019, June). THE EFFECT OF THE SIZE OF THE INFORMAL SECTOR ON ECONOMIC GROWTH IN KENYA (1974 TO 2016). Int. j. of Social Science and Economic Research, 4(6), 4712-4727. Retrieved from
Opondo, Mary Awuor, Prof. Martin N. Etyang', Dr. Susan Okeri, and Dr Angelica Njuguna. "THE EFFECT OF THE SIZE OF THE INFORMAL SECTOR ON ECONOMIC GROWTH IN KENYA (1974 TO 2016)." Int. j. of Social Science and Economic Research 4, no. 6 (June 2019), 4712-4727. Accessed June, 2019.


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The Kenyan economy is dual and predominantly informal. The size of the sector in the country has grown over time. The sector employed 19 percent of the total workforce in 1974 which increased to 84 percent in 2016. The country targets economic growth averaging 10 percent per annum, and a reduction in poverty rates to 28 percent of the total population by the year 2030. Efforts to develop the sector for economic growth, employment creation and poverty reduction can be traced to the period 1986, under the Sessional Paper No.2 of 1986 on Economic Management for Renewed Growth. The growth of the informal sector in the country has led to a marked increase in employment numbers, but not much is known about the effect on the other two objectives, which are economic growth and poverty reduction. Reports on the contribution of the sector to economic growth are largely conflicting with limited econometric studies. The study analyzed the relationship between the size of the informal sector and economic growth in Kenya. A growth accounting exercise was conducted using the standard Cobb-Douglas production function. From the study findings, the informal sector is the lowest contributor to output growth in the country. Given the size of the sector the study concludes that there is a need to target increased productivity in the informal sector for increased economic growth.