Productivity Factors and the Growth of the Manufacturing Sector among the East African Community Members States: Testing the Adequacy of the Endogenous Growth Hypothesis

Abstract

Purpose: It is well documented that the manufacturing industry plays a vital role in a country's economic growth and progress. This study benchmarks the endogenous growth paradigm in order to assess the productivity drivers that may affect the output growth of the manufacturing sector in East African Community member states. The empirical model covering the years 2000–2020 was constructed using panel data. Methodology: The study adopts a longitudinal research design and tables used to present summary estimates. Analysis has been achieved using stata statistical package version 17.0. A D-GMM estimator was employed to estimate the underlying empirical model. Findings: Foreign direct investments, inflation, trade openness, and lending interest rates were shown to be the most influential variables in the rise of manufacturing sector production among EAC member states out of a large sample of productivity indicators analyzed in the study. Recommendations: The results show that EAC countries can boost their manufacturing output by attracting more FDI, keeping inflation low, boosting cross-border trade, and enacting policies to lower the costs associated with credit access. Unique in this study is the analysis, first of its kind, of the productivity drivers of the growth in manufacturing sector output in the East African Community member states within the general framework of endogenous growth theory.