Factor Proportions, Openness and Factor Prices in Kenya 1965–2000

Abstract

This study analyses how changes in factor abundance and openness have affected relative factor prices in Kenya since 1965, using cointegration analysis and error correction models of relative factor prices. We find that factor proportions determined relative factor prices in the long run, while openness, measured by three different proxies, possibly had a short run effect on relative factor returns. The only deviation from this pattern occurred during the latter half of the 1990s when there was rapid wage growth, mainly due to labour market deregulation.