Effect Of Electronic Commerce On Output And Total Factor Productivity In Kenya

ABSTRACT

Kenya seeks to transform into a middle-income country by 2030 with target annual growth rates

of 10 percent. However, this target has not been realized since growth rates are under 10 percent

while 36 percent of the population lives below the poverty line. While this has been interpreted

as an underperformance by various studies, this study attempted to show that the economic

growth witnessed in the years 2007 to 2018 pointed to a resilient economy characterized by an

average steady growth rate of 5.4 percent despite the deterioration of the global economic

outlook. This resilience coincided with the adoption e-commerce, increased output in absolute

values and an emphasis of Information Communication Technology as a key industry under the

economic pillar of the Kenya Vision 2030. More importantly, this period also saw the emergence

of unique payment gateways particularly mobile payment gateways which this study argued for

and used as a key enabler for E-commerce among other enablers. E-commerce activities increase

efficiency and ease of doing business by reducing costs and barriers of operation, which are

important for achieving economic growth. This, therefore, renders e-commerce critical to

economic growth in transition countries such as Kenya. This study focused on Kenya because of

a key e-commerce enabler in the form of mobile payments services. Various studies showed

positive findings on the effect of e-commerce on output and total factor productivity. However, a

majority of the studies focused more on regions outside Africa and Kenya. This called for an

investigation into the effect of e-commerce on output and total factor productivity in Kenya. The

objectives of the study were, to investigate the contributions of e-commerce to economic output

and the effect of e-commerce on total factor productivity in Kenya. To achieve the objectives,

the study developed a framework following the neoclassical and endogenous growth theories.

The study used quarterly time-series data from the period 2007 to 2018. All relevant time-series

tests were performed. To address both objectives, the study applied Ordinary Least Squares

regression models. The results suggested that e-commerce had a positive effect on output.

However, the coefficient was not statistically significant. This is perhaps because of low

adoption by enterprises and market dominance by one mobile payment platform. The effect of ecommerce

on Total Factor Productivity was positive when considering the value of mobile

payments while that of card payments was negative. Therefore, for Kenya to experience episodes

of output growth and an increase in total factor there should be continued investments towards ecommerce in terms of capital and mobile payments technology.

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APA

KITHINJI, E (2021). Effect Of Electronic Commerce On Output And Total Factor Productivity In Kenya. Afribary. Retrieved from https://afribary.com/works/effect-of-electronic-commerce-on-output-and-total-factor-productivity-in-kenya

MLA 8th

KITHINJI, ELVIS "Effect Of Electronic Commerce On Output And Total Factor Productivity In Kenya" Afribary. Afribary, 01 Jun. 2021, https://afribary.com/works/effect-of-electronic-commerce-on-output-and-total-factor-productivity-in-kenya. Accessed 29 May. 2024.

MLA7

KITHINJI, ELVIS . "Effect Of Electronic Commerce On Output And Total Factor Productivity In Kenya". Afribary, Afribary, 01 Jun. 2021. Web. 29 May. 2024. < https://afribary.com/works/effect-of-electronic-commerce-on-output-and-total-factor-productivity-in-kenya >.

Chicago

KITHINJI, ELVIS . "Effect Of Electronic Commerce On Output And Total Factor Productivity In Kenya" Afribary (2021). Accessed May 29, 2024. https://afribary.com/works/effect-of-electronic-commerce-on-output-and-total-factor-productivity-in-kenya