Export Propensity And Intensity Of Manufactured Exports In Kenya: A Control Function Approach

Abstract:
A distinctive feature of the manufacturing sector in Kenya is the co-existence of the modern sector alongside a rapidly expanding informal sector. While the formal sector comprises mainly small, medium, and large-scale enterprises (i.e., firms employing more than 100 workers), the informal sector consists of numerous open-air small and microscale productive activities in towns and rural trading centres, usually employing less than five workers. Traditional artisan production in the informal sector is dominated by small undertakings employing less than 5 workers. A large proportion of these firms’ output is directed towards satisfying needs of consumer goods and services domestically. These include items such as clothing, furniture, foodstuffs and motor vehicle repairs. While data on this sub-sector is not easy to come by, there is little doubt from casual empiricism that it is one of the fastest growing sectors, and a major source of employment in the country (Ikiara, 1991, Republic of Kenya, 2007). It is equally clear that this sector has little or no impact on Kenyan manufactured exports, due mainly to the low quality of their products.