Determinants of Infrastructure Development in Kenya

Abstract

Empirical research on the macroeconomic factors influencing infrastructure development has yielded inconclusive results, with significant variations observed across studies. This study examines the determinants of infrastructure development in Kenya using a time series data analysis framework, with data spanning from 2003 to 2024. The study’s main estimates use the generalized-method-of-moments (GMM) estimator that allows us to account for the potential endogeneity of the infrastructure and explanatory variables through the use of instruments. The results of this study showed that economic growth, public debt, and foreign direct investment have a significant positive influence on infrastructure development in Kenya. Interestingly, urbanization does not have a significant impact, suggesting that this factor may be less influential in infrastructure expansion. These results have significant policy implications. In order to promote infrastructure development, Kenya needs to achieve sustainable economic growth, manage public debt cautiously, and attract foreign direct investment. These findings underline the need for tailored infrastructure development policies that account for the unique macroeconomic structures and policies that influence infrastructure development and facilitate additional investment in infrastructure in Kenya.