Effect of Foreign Direct Investment on Public Sector Employment Levels in Kenya

Abstract

The purpose of this study was to assess the effect of Foreign Direct Investment on public sector wage levels in Kenya. . FDI in an economy helps in promoting economic efficiency gains into the economy through the transfer of improved technology, managerial skills, organizational techniques, access to foreign markets through channels for marketing products, increasing employment opportunities and wages and improving standard of living. Purposive sampling method was used to select a sample of macroeconomic data on FDI and Public employment levels for 30 years between 1985 and 2014. Error correction model was developed from the data, which was used to make inferences on the relationship between FDI and public employment levels. Inferential statistics were obtained by applying the PcGive Ox-metrics and E-views. Prior tests on unit root were done using Augmented Dickey Fuller (ADF) test and Phillips Perron (PP) tests in comparison with the mackinnon critical value of standard neyman pearson framework. Also co integration was done through the use of Engle – granger (EG) approach and the Johansen Juselius approach to determine whether a long-run relationship exists.