Child Labour Economic Growth in Kenya. An Empirical Study of a Long Run Relationship

Master's Thesis from the year 2019 in the subject Business economics - Economic Policy, Kenyatta University, course: MASTERS OF ECONOMICS (POLICY & MANAGEMENT), language: English, abstract: This study seeks to determine the relationship between economic growth and child labour in Kenya. This was first undertaken by determining the causality between economic growth and child labour in Kenya.

In 2017, the International Labour Organization reiterated that elimination of worst forms of child labour has been recognized to be critical pertaining to social and economic development sustainability. Child labour will continue to persist from now on and several decades to come in the Kenyan economy if not curbed. Kenyäs Gross Domestic Product increased rapidly from 18.7 billion US $ in 2005, to 63.8 billion US $ in 2015. Child labour rose steadily from 2.4 million child labourers in 2005 to 3.7 million child labourers in 2015, despite positive increment in Kenyäs Gross Domestic Product in Kenya from 2005 to 2015. From trends discussed in chapter one, it appears that positive increases in economic growth levels alone cannot be the only means to help in reducing or eliminating child labour in Kenya. Kenyäs Gross Development Product has been increasing since 1980 to 2017 amidst fluctuations. Despite positive growth in Kenyäs Gross Domestic Product, there is still an increase in child labour. The Toda-Yamamoto modified Granger causality (non-causality) model was fitted with time series data for the period 1980 to 2017. The estimated results revealed that there was no causality running from child labour to GDP in Kenya. Furthermore, there was causality running from GDP to child labour in Kenya. To establish the existence of a long run relationship between economic growth and child labour in Kenya, the unrestricted conditional error correction model was used in which economic growth was the dependent variable. The explanatory variables were child labour, investment in human capital, international trade openness, population growth and foreign direct investment. The estimation results revealed that a long run relationship existed between economic growth and child labour in Kenya. To determine the short run effects of child labour to economic growth in Kenya, the restricted error correction model was used in which economic growth was the dependent variable.

The estimation results revealed that the coefficient of child labour was statistically significant in affecting economic growth of Kenya in the short run. From the empirical results, it was concluded that there was no causality running from child labour to GDP in Kenya where GDP was the dependent.