Working Paper
The African Lions

This paper mainly analyses the drivers of economic growth in Kenya and the linkages to the labour market dynamics, with a focus on population growth, its structure, and the prospects of reaping a demographic dividend. This is in recognition that Kenya, as the ninth largest economy in Africa and the fourth largest in sub-Saharan Africa and with a locational advantage, presents some policy lessons and challenges that can boost its capacity for growth and take advantage of its location and the policy environment to drive growth in the region.

The results show earnings to vary widely across sectors, reflecting barriers to labour mobility. The rising labour productivity (since 2009) indicates an improvement in the efficiency of labour use, although growth-employment elasticities have slightly declined in recent years. Whereas formal wage employment growth has closely tracked gross domestic product growth since 2004, such a relationship is absent with respect to employment in the informal sector, which dominates the economy.