An Empirical Analysis of Foreign Remittances, Education Index, and Human Development in Kenya

Abstract

Every government pursues high living standards, appropriate education, and better-quality general wellbeing of its citizens. It is feasible that an economy on the right course of attaining sustainable development goals could flourish in human richness. Kenya endeavours to advance the wellbeing of her people. There has been a rise in human development from 0.468 human development index in 1990 to 0.575 in 2021. This is a 22.86% increase. However, this is low compared to economies with high levels of human development. Kenya is classified at the medium level, below the standards stipulated by the United Nations Development Programme. This classification recommends economies have a high or very high human development index. Numerous studies in Kenya have focused on foreign remittances and education expenditure. This offers diminutive consideration to remittances and human development. This paper seeks to fill this gap by focusing on foreign remittances, education index and human development. This area has only received derisory attention even though foreign remittance has been one of the crucial financial foreign inflows in the country. The paper espouses a non-experimental research design to explain the effects of foreign remittances on human development by dint of education index conduit. The vector error correction model, a cointegrated vector autoregression model, is applied in this research to analyse data. This establishes a short-term relationship between foreign remittances and the education index while correcting the deviation from the long-term movement of these variables. Secondary time series data for the period 1990 to 2021 is used. Statistical analysis was conducted using E-views statistical package. This paper concludes that foreign remittances in Kenya have negative and significant effects on the education index in the short run. This indicates that a vast amount of remittances received in Kenya are not channelled to educational purposes. The long-run impact is statistically inconclusive.