Impact of Unemployment Rate on Income Inequality in Kenya

Abstract

Purpose: Impact of unemployment rate on income inequality in Kenya

Design/Methodology/Approach: Through a longitudinal approach, secondary time series data from the World Bank, Transparency International, UNDP and SWIID, and by applying the Augmented Dickey Fuller, Johansen cointegration and vector error correction model.

Findings: This study found that the mean inequality index is 0.461 while unemployment has a mean of 12.75. Unemployment was found to have a direct significant long run impact on inequality of -2.2869 (p < 0.001) in the first cointegrating vector (CI1).

Implications/Originality/Value: It is thus important that robustness checks are done before drawing conclusions. The study concludes that there exists long run relationship between inequality and unemployment, the latter variable has a dominant role, and there exist long run relationships between inequality and unemployment