Var model of a cointegrated system: structural change and economic growth in ken

Abstract

The objective was to show that structural change plays a significant role in economic growth in the Kenyan economy. Structural change in the cointegrated VAR model was described as the deviation of actual production technologies from efficient production technologies. This was in relation to previous studies that had concluded that structural changes were mostly significant in poor countries and that the rate of labour transfers between low productivity and high productivity sectors may have a significant effect on the rate of economic growth, by directly increasing sector productivities (Duarte,Restuccia, 2007).Data Analysis and interpretation of the cointegrated VAR model revealed that structural changes were important for growth in output and labour and were mostly significant in industry where production and employment was well below the optimal steady state(competitive equilibrium).