Effect of Corruption on Kenyas Economoc Growth

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UNIVERSITY OF NAIROBI
SCHOOL OF ECONOMICS

THE RELATIONSHIP BETWEEN CORRUPTION AND ECONOMIC GROWTH IN KENYA

MULEMBO ENOKA X75/3844/2008
GERALD NGILAI MUEMA X74/3741/2008
GITHINJI JOSEPH MULWA X74/3726/2008 WANGARI ELIJAH GACHOHI X75/3777/2008 KIRU JOSEPH KAMAU X74/ 3599 /2008

TABLE OF CONTENTS

INTRODUCTION1
1.1 Background to the study1
1.1.1 Ministry of Finance Kenya………………………………………………………... 2 1.2 Research Problem Statement3
1.3 Research objectives3
1.3.1 General Objective………………………………………………………………….. 3 1.3.2 Specific Objectives…………………………………………………………………..3 1.4 Research Questions4
1.5 Significance of the Study4
1.6 Research Limitations5
1.7 Scope of the Study5
1.8 Definition of Key Terms6

CHAPTER TWO: LITERATURE REVIEW7
2.1 Introduction7
2.2 Theoretical Review7
2.2.1 Theory of public choice……………………………………………….……………. 7 2.2.2 Theory of Revenue Extraction………………………………………………….… 8 2.2.3 Theory of externalities………………………………………………………….… 9 2.2.4 Theory of public goods………………………………………………………….… 9 2.2.5 Theoretical Framework……………………………………………………..…….. 10 2.3 Empirical Review 10

2.3.1 Foreign aid……………………………………………………...…………… 11 2.3.2 Government Policy……………………………………………………………..… 13 2.4 Conceptual Framework 13
Figure 1.2 Conceptual Framework13

CHAPTER THREE: METHODOLOGY14
3.1Introduction14
3.2 Research design14
3.3 Data Type and Sources14
3.4 Model Specification
3.5Assumptions of our Model15
3.6 Validity and reliability15
3.7 Data analysis and presentation16

REFERENCES17

CHAPTER ONE

INTRODUCTION

1.1Background to the study
Public Expenditure Management (PEM) in Kenya is weak as indicated by a big gap between the original printed budget and outturn, and a huge stock of expenditure arrears. As a result, the budget is an ineffective instrument for strategic linking of resources and spending. Cases of corruption have been reported in almost all government ministries perpetuated by government officials. Corrupt practices have deep social roots in Kenya, under the KANU regime (1963-2002) relationships based on loyalty and dependence permeated the formal political and administrative system through the predominant party. Wealth was redistributed towards a clientele chosen because of ethnicity tribalism or status within Kenya society. Tribal leaders were rewarded for their loyalty with positions in government and key sectors of the economy that conferred access to public resources to reward their constituencies. The world bank defines corruption as “the abuse of power, most often for personal gain or for the benefit of a group to which one owes allegiance. It can be motivated by greed, by desire to retain or increase one’s power or perversely enough, by the believe in a supposed greater good … while the term “corruption” is most often applied to abuse of public power by politicians or civil servants, it describes a pattern of behavior that can be found in every sphere of life.” (Stapenhurst and Sedigh, 1999). Corruption as a problem in Kenya dates back to the colonial times. In 1956, the Prevention of corruption Act (Chapter 65- laws of Kenya) was passed by British colonial authorities in an effort to provide a legal framework for combating public corruption. It provided for the punishment of bribery involving holders of public office. The act was amended in 1991 to provide stiffer penalties for those convicted of corruption. In 1993, the anti- corruption squad was established in the police force to spearhead the fight against corruption. in 1997, the prevention of corruption Act was amended to establish the Kenya anti corruption Authority(KACA), which was declared unconstitutional in 2000. This declaration by a constitutional court was on the basis, among others, that...
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