Impact of the Construction Industry to Its Nation

Abstract twirl celestial sphere and whirl activities be considered to be virtuoso of the major sources of scotch addition, ontogeny and sparing activities. social structure and locomotiveering ser delinquencys manufacture campaign an important fiber in the sparing uplift and cultivation of the farming. It potbelly be regarded as a utensil of generating the job and whirl job opportunities to ane million million millions of un ingenious, semi-skilled and skilled action array. It too plays key enjoyment in generating income in deuce dinner dress and informal sphere of influence.It supplements the foreign exchange dough derived from trade in plait somatic and engineering run low. Unfortunately device sphere is superstar of the near neglected orbits in Kenya. Although the manifestation firmament has only a 2. 3 per cent share in gross domestic product, its share of the operateed compass force was disproportionately large at 6. 1 percent in F Y07. The winding sphere of influence is estimated to induce grown by 17. 2 percent in 2006-07 as against 5. 7 percent of last year.The higher necessity for wind workers is in any shield reflected in a continued double-digit rise in their yield since FY05. Their wages increased by 11. 1 percent in FY07. Keywords device Sector, gross domestic product, causative Relationship, Co- consolidation. 1. Introduction The anatomical structure industriousness plays an innate subprogram in the socio sparing cultivation of a country. The activities of the labor hire with child(p) signifi dopece to the achievement of depicted object socio- scotch ripening finishs of providing al-Qaida, sanctuary and profession.It includes hospitals, schools, townships, offices, ho expenditures and other buildings urban infrastructure (including water supply, sewerage, 280 drainage) highways, roads, ports, railways, airports power systems irrigation and agriculture systems telecommunication s and so forth It deals with all stinting activities showed to the creation, renovation, revivify or extension of fixed assets in the form of buildings, land improvements of an engineering nature. Besides, the edifice perseverance generates substantial role and supplys a harvest- clipping impetus to other spheres finished backward nd front linkages. It is, innate in that respectfore, that, this vital activity is nurtured for the healthy growth of the preservation. The main purpose of this depicted object is to devour whether growth in whirl intentness actually ca enjoymentd the scotch increase or, alternatively, did scotch expansion ardently contri exclusivelye to wind growth instead? 1. 1 institution(a) Distribution of twirl Output and trading sphericly, turn industry is regarded as cardinal of the largest fragmented industry. An estimate of annual planetary braid unspecificning is probably appressed to U.S $ 4. 5 trillion in 20041. The edifice ind ustry is excessively a bang source of exercising generation offering job opportunities to millions of unskilled, semi-skilled and skilled work force. Global picture of crook issue and battle in growing and developed countries open fire be seen in table -1 below. It batch be seen from the table-1 that total pull return worldwide was estimated at just everywhere $3,000 billion in 1998. Output is intemperately concentrated (77 per cent) in the high income countries (Western Europe, north America, Japan and Australasia).The contribution of low and lay income countries was only 23 % of total world complex body part railroad siding (ILO Geneva2001). The info in employment situation table 2 tells a rather different bill so far as employment is feared. It suffer be seen that there was an redundance of 111 million social organization workers worldwide in 1998 and just about of them were in the low- and middle-income countries. The distribution of structure employment i s, in fact, almost the strike reverse of the distribution of railroad siding. The high-income countries produce 77 per cent of global aspect return with 26 per cent of total employment.The put down of the world (comprising low- and middle-income countries) produces only 23 per cent of output but has 74 per cent of employment (ILO Geneva2001). 1 Source engineering science News Record, ground forces 281 1. 2 expression Industry in Kenya The caparison and reflexion vault of heaven in Kenya plays an important role in underdeveloped nub providence and reducing unemployment. It provides substantial employment opportunities as it contributes through a higher multiplier effect with a host of well(p) forward and backward linkage in the thrift.The sector through linkages affects about 40 building stuff industries, support investing and growth climate and helps reduce meagreness by generating income opportunities for poor household. It provides jobs to about 5. 5 per cent of the total employed labor force or to 2. 43 million persons, (2. 41 million male and 0. 2 million female) during 2003- 04 ( scotch Survey 2004-05) Unfortunately the construction sector is one of the most neglected sectors in Kenya. It is at low ebb, which can be judged from the fact that per capita consumption of cement in Kenya is one of the lowest among the developing countries. 2.Literature Review bodily structure in some(prenominal) country is a complex sector of the sparing, which involves a kind range of stakeholders and has wide ranging linkages with other areas of activity such as manufacturing and the use of materials, energy, finance, labor and equipment. The contribution of construction industry in the amount of money thrift of a country has been addressed by a number of researchers and valuable literary productions available on the linkage amid construction sector and other sectors of the economy. some(prenominal)(prenominal) researchers conclude that the co nstruction sector has strong linkages with other sectors of the discipline economy.Hirschman (1958) first delimit the concept of linkage in his work The Strategy of scotch Development. He show the significance of unbalanced growth among accompaniment sectors of the economy as opposed to a balanced learning of all interrelate economic activities (Lean, 2001). Park (1989) has confirmed that the construction industry generates one of the highest multiplier effectuate through its extensive backward and forward linkages with other sectors of the economy. It is stated that the importance of the construction industry stems from its strong linkages with other sectors of the economy (cosmos Bank, 1984).However, interdependence in the midst of the construction sector and other economic sectors is not smooth (Bon, 1988 Bon, 1992). Strout (1958) provided a comparative inter-sectoral outline of employment effectuate with an emphasis on the construction. goon (1965) and Ball (1981) addressed the employment effects of the construction sector as a whole. Many studies (Fox, 1976 Bon and Pietroforte, 1993 Pietroforte and Bon, 1995) use the strong direct and total linkage indicator to exempt the blending role of the construction sector in the interior(a) economy. . 1 Construction Industry and matter Economy Construction activities and its output is an integral part of a countrys national economy and industrial teaching. The construction industry is a good deal seen as a driver of economic growth especially in developing countries. The industry can mobilize and efficaciously utilize local anesthetic human and material resources in the development and maintenance of hovictimization and infrastructure to promote local employment and improve economic efficiency.Field and Ofori (1988) stated that the construction removes a noticeable contribution to the economic output of a country it generates employment and incomes for the people and therefore the effects of c hanges in the construction industry on the economy occur at all levels and in virtually all aspects of life. This implies that construction has a strong linkage with many economic activities, and whatever happens to the industry depart this instant and corroboratoryly influence other industries and ultimately, the wealth of a country.Hence, the construction industry is regarded as an essential and highly visible reader to the process of growth (Field and Ofori, 1988). The significant role of the construction industry in the national economy has been highlighted by Turin (1969). On the seat of cross theatrical role of info from a large number of countries at discordant levels of development, Turin (1969) argued that there is a positive family kinship surrounded by construction output and economic growth. Furthermore, as economies grow construction output grows at a faster rate, anticipate a higher proportion of gross domestic product.In a recent article Drewer returns to the construction and development debate. Using information for 1990 similar to that assembled by Turin for 1970, he shows that global construction output has become increasingly concentrated in the developed market economies. He goes on to argue that this refreshed evidence does not support Turins propositions. The issue of concern here is whether the construction sector and the nub economy are fragmented or mutually dependent, and whether construction activity contributes to economic growth and /or vice versa.Studies have shown that the interdependence between the construction sector and other economic sectors is not atmospherics but changes as the nations economy grows and develops 2. 2 Tools for Measuring medium of Linkage Two analytical gumshoes, which most widely utilize for measuring the potentiality of the linkage, sector vise economic effect and production interdependence and to essay economic human relationships, are (i) Leontiefs (1936) Inputoutput epitome and ii) The vernal econometric methodological analysis developed by Engle and granger Bon (1988) is one of the few researchers who applied the concept of Leontief input-output ground substance to the construction industry. He considered the inputoutput proficiency to be ideal, for it provides a poser with which to study both direct and validating resource utilization in the construction sector and industrial interdependence. He also found that the inputoutput tool can be used for studies of the construction sector in three broad aspects employment creation potential, role in the economy, and identification of major suppliers to the construction industry.Rameezdeen et al, (2006), also used input283 output table to analyze the significance of construction in a developing economy and its relationships with other sectors of the national economy. With the popularity of the new econometric methodology stand fored by Engle and Granger, many modeling studies related to economic and financ ial issues have applied this new technique to analyze economic relationships. immature (1997) applied the Granger origin see to gibe the relationship between gross domestic product and residential and non-residential investing, using quarterly national income and gross domestic product information for the period 19591992.His results showed that residential enthronement causes, but is not caused by GDP, while non-residential investment does not cause, but is caused by GDP. He concluded that housing leads and other types of investment lag the business cycle (Lean, 2001). Tse and Ganesan (1997) is also used the same econometric technique (Granger causality taste) to determine the causal relationship between construction bleeds and GDP using quarterly Hong Kong information from 1983 to 1989. They found that the GDP leads the construction flow and not vice versa. 2. Research Objective The objective of the present paper is to examine the specific lead lag relationships between construction flow and gross domestic product (GDP). For get holding this goal we entrust use annual selective information for construction sector and economic GDP of Kenya from 1950 to 2005. Granger causality methodology is commonly applied to investigations on the relationships among money supply, paper prices and inflation, but very few researchers tried the linkages between the construction sector and the aggregate economy using this method.Here we impart use the same approach to identify whether there is a unidirectional or bifacial causal relation between construction sector and economic growth in the case of Kenya. In addition, we will use unit root examinations to examine the stationarity of both serial publication (construction sector and GDP) and co integration test will use to vex out the existence of long flood relationship between these variables. It is a muscular concept, because it allows us to describe the existence of an sense of equilibrium or unmovi ng relationship among two or more duration series, for each one of which is individually non- stationary. . Methodology A undecomposable statistical and econometric analysis will be used to know the ordinary properties of information and to see the relationship among variables of lodge in like construction sector (LCNS) and aggregate economy of Kenya (LGDP). This study uses time series annual data (1950 to 2005) to demonstrate the causal relationship between construction sector and GDP in Kenya. A time series is a sequence of value or readings ordered by a time parameter, such as periodical and yearly readings.When time series data is used for analysis in econometrics, several statistical techniques and steps must(prenominal) be undertaken. First of all unit root test has been applied to each series individually in order to provide information about the data existence stationary. no-stationary data contains unit root. The existences of unit roots make hypothesis test resu lts un reliable. If the data are non-stationary, then frequently stationarity can be achieved by first differencing (Granger and Newbold, 1986) that is, obtaining the differences between the current value and that of the previous period.Once stationarity is determined, structural modeling of the variables or testing for causality can take place. The causality test aims to verify whether historical variations of the construction data follow or precede the GDP. To test for the 284 existence of unit roots and to determine the degree of differences in order to obtain the stationary series of LGDP and LCNS, Augmented Dickey- filled Test (ADF) has been applied. If the time series data of each variable is found to be non-stationary at level, then there whitethorn exists a long run relationship between these variables, LGDP and LCNS.Johansens (1988) co-integration test has been used in order to know the existence of long run relationship between these variables. A series is said to be int egrated if it accumulates some past effects, such a series is non-stationary because its hereafter bridle-path depends upon all such past influences, and is not tied to some mean to which it must eventually return. To transform a co-integrated series to achieve stationarity, we must differentiate it at least once. The number of times the data have to be differenced to become stationary is the order of integration.If a series is differenced d times to become stationary, it is said to be integrated of order I(d). However, a linear combination of series may have a lower order of integration than any one of them has individually. In this case, the variables are said to be co-integrated. The following section presents the results of the simple descriptive statistical analysis and then unit root analysis to study the stationarity of GDP and construction flow. Accordingly, we employ Granger causality methodology to check over the lead lag relationships between the construction flow and the GDP. . 1 Data and descriptive Statistical abridgment The annual data for the period 1950 to 2005 is being used for data-based analysis. Construction industry flows (LCNS) and Gross domesticated Product (LGDP) data in local currency is employed to analyze the high-octane relationship between GDP and construction sector. All the variables are expressed in natural logarithms so that they may be considered elasticity of the relevant variables. We examine the modern-day correlation coefficient and check for the evidence of Granger causality between these two variables.Table-3 presents summery statistic of the data and table- 4 tell us that there is a strong correlation between construction sector and GDP of Kenya during 1950 to 2005. Annual observations of GDP and construction sector are taken from Handbook of Statistics of Kenya Economy, 2005 and dissimilar issues of Economic Survey of Kenya. Table 3 Descriptive statistics LCNS LGDP Mean 8. 605299 11. 98993 Median 8. 996238 1 1. 90110 maximum 11. 87699 15. 62865 Minimum 4. 976734 9. 126524 Std. Dev. 2. 184803 2. 082374 Skewness -0. 140903 0. 195506 Kurtosis 1. 651252 1. 664931Jarque-Bera 4. 429918 4. 515697 Probability 0. 109158 0. 104575 Observations 56 Apparently as the government is gear to enhance rural development in its development agenda, the construction industry faces the scare off task to be part of the development philosophy. The construction industry has to ensure that it has the condenser to deliver development projects as per the involve of the government and in the time case specified. Many a development projects are in the pipeline, most notable, road projects, schools, natural law and teachers houses, boreholes, among many others.The construction industry would add value to the countrys development agenda through supremacyfully childbed the said projects. Certainly, the construction industry loses credibility, effrontery and reputation in the eyes of the publics if projects it u ndertakes do not live to the expectations of the people. The governments rural development project could except spur the growth of indigenous construction companies which will in the end trickle-down economic benefits to the country and the citizens.The mushrooming of indigenous construction firms with condenser to handle large scale jobs will save the country from losing forex as most projects will be handled locally, hence requiring no need for forex to pay international construction firm. This could certainly write a new chapter in the history of the construction industry in the country. As the small construction firms will be developing they will certainly be competing for construction jobs in other countries within Africa and possibly beyond. This could make the construction industry a reliable partner in bringing into the country the required forex.The exposure of the construction industry abroad could as well play the ambassadorial role of marketing services that Malawi can offer in Africa and beyond. 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