Determinants of location of manufacturing firms in Kenya

Type Thesis or Dissertation - Master of Arts in Economics
Title Determinants of location of manufacturing firms in Kenya
Publication (Day/Month/Year) 2014
URL of Location of​Manufacturing Firms in Kenya.pdf?sequence=3
Growth of the Manufacturing Sector is very essential for employment creation and economic
growth. The contribution of Manufacturing Sector to economic growth in Kenya has not been
very impressive, as evidenced by its contribution to the Gross Domestic Product (GDP). In the
year 2013, Manufacturing Sector accounted for 8.9 per cent of the Gross Domestic Product
(GDP) and provided 12.4 per cent of employment in the formal sector. The growth of the
Manufacturing Sector which has been at an average of ten (10) percent has stagnated in the past
five (5) years. At the moment, there exists uneven distribution in the number of Manufacturing
Firms (MFs) located in Kenyan Counties, which has resulted in the disparity and un-equitable
regional development. The key concern therefore, is to establish the source of such variation of
Manufacturing Firms across Counties, given that the essence of devolution is to achieve balanced
regional development. The study aims at investigating key drivers in setting up of Manufacturing
Firms, the extent at which County activities influence location processes and patterns of
Manufacturing Firms across the Kenyan Counties using Poisson Model and suggest policy
recommendations that Counties might adopt for implementation. The results show that cost of
land and access to electricity act as the overriding factors as far as location of MFs is concerned.
However, what might be taken as astonishing is the realization of the negative and insignificant
influence of water access. On the basis of these results, it can be taken that significance of cost of
land and electricity access is in tandem with the tenets of location theory and partly neoclassical
theory. Furthermore, it depicts the place of natural utilities and infrastructure in determining a
firm’s location.

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