Onuonga, Susan Mora (2008) An Econometric Analysis of Energy Utilization in the Kenyan Manufacturing Sector. PhD thesis, Kenyatta University.
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Abstract
The overall purpose of this study was to analyze the factors that influence energy utilization in Kenya's manufacturing sector and to determine the extent of substitution possibilities between energy inputs and other non-energy factors of production within the Kenyan manufacturing sector over the 1970- 2005 period. The Kenya manufacturing sector is a major consumer of commercial energy in Kenya. It is the second largest user of petroleum products and the largest user of electricity. There is hardly any evidence that shows that the sector uses biofuels. The analysis of price and non-price variables that affect the use of energy within this sector is necessary for designing policy measures that can lead to energy conservation. Information on the degree of energy substitution is important in predicting the effects of energy shortages on manufactured output and industrial employment. This study used the translog model to analyze total factor demands and inter-fuel substitutions. Estimation was done in two stages. First, the sub-energy model was estimated and an aggregate energy index computed. In the second stage, the total factor cost shares were analyzed using the estimated energy price index as an instrumental variable. Estimation in all stages was done by the use of Maximum Likelihood Method. In divergence from the previous studies in Kenya, time series properties of the data were fully investigated before model estimation was done. The study found that, price of energy, cross price, output, technology, price of capital and unexpected events (droughts, U.S.A's attack on Iraq in 2003, and multiparty elections) influenced the sector's use of energy. The results for interfuel model indicated that demand for electricity and oil in the Kenyan manufacturing sector were price inelastic and that oil and electricity are substitutes. The fuel price and the cross price elasticities were found to be small but statistically significant. These results imply that manipulation of the fuel prices alone cannot achieve much in controlling the use of energy in the Kenyan manufacturing sector. Limited substitution possibilities between electricity and oil in this sector were found. Small substitution possibilities between energy and non-energy inputs were also detected. The results for the total factor cost shares showed that demand for energy and labour were price inelastic while that one of capital had a unitary elasticity. The results further showed that energy, labour and capital were substitutes, but the degrees of substitution among the factors were found to be very low, ranging from 0.07 to 0.75. This suggested that costs of production within the sector might rise significantly as a result of the price increase of the inputs, especially of energy.
| Item Type: | Thesis (PhD) |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory |
| Divisions: | Africana |
| Depositing User: | Tim Khabala |
| Date Deposited: | 07 Jun 2017 09:23 |
| Last Modified: | 07 Jun 2017 09:23 |
| URI: | http://thesisbank.jhia.ac.ke/id/eprint/1705 |
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