Modelling the Agriculture Sector Value Added for the Kenyan Economy

Jacob Nato

Department of Macroeconomics, Kenya Institute for Public Policy Research and Analysis, Nairobi, Kenya.

Corresponding Author E-mail: jacobnato84@gmail.com

DOI : http://dx.doi.org/10.12944/CARJ.14.1.17

Article Publishing History

Received: 23 May 2025
Accepted: 27 Nov 2025
Published Online: 17 Mar 2026

Review Details

Reviewed by: Dr. Arrington, Wandra
Second Review by: Dr. Prajakta Mohite
Final Approval by: Dr. Afroz Alam

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Abstract:

This paper is developed as part of developing a supply-side macro model for Kenya. It applies the production function approach to model Kenya’s agricultural gross value-added (GVA) or the sector's output. Depending on the nature of sectoral data, this will determine the choice of different production functions. The equation was estimated using the Gross Value Added (GVA) for the Agricultural sector and then used to project the future values of GVA in the agricultural sector. The econometric technique applied was the Co-integration method based on a Fully Modified Ordinary Least Squares equation, applying the Cobb-Douglas Production function approach. Thus, the key study variables for analysis were capital stock, labour force in the sector, technology, and a few other sector-specific control variables such as climate-related variables. For robustness checks, an additional equation was re-estimated for the sector by dropping insignificant variables. The projections showed that GVA was expected to increase from Ksh 1.78 trillion in 2023 to an estimated Ksh 2.32 trillion in 2028. For Kenya, there is evidence of a changing structure of the economy towards a service-based economy, with the shares of agriculture and industry to GDP having decreased over time, a trend that calls for policy intervention, given the critical role of agriculture in food security.

Keywords:

Agriculture sector; Capital stock; Cobb-Douglas; Fully modified least squares; Gross domestic product; Gross value added; Labour force; Supply side model

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