A simulation model of the Kenya national economy and its use as a guide to economic policy

Abstract

This paper describes a simulation model of the Kenya national economy. The aim is to present a novel way of identifying, discussing and analysing a fairly wide spectrum of development problems facing Kenya. The model consists of a nine-sector input/output production component linked to a consumption component composed of four rural and five urban income classes. One of the main features of this model is that it is demand driven. Thus, growth rates in the productive sectors are generated endogenously as a function of demand. The model also deals with questions of income distribution, rural-urban migration and inflation. An overview is presented of the Kenyan economic and planning environment and the development and applications of the Kenya Simulation Model (KENSIM). The structure as well as the computational sequences of the model are described. A more detailed description of the model, including the overall structure (as reported in Slater and Walsham 1975) the set of economic assumptions and equations, the fortran computer programme, and the details of the data sources are reported in a forthcoming book by Slater, Walsham and Shah(l977). The paper goes on to discuss the application of KENSIM as a forecasting tool and for the simulation of alternative policy options, giving the example of rural-urban migration. The scope for further application and development of KENSIM is wide, and some of the major areas of current interest are identified. Some lessons and experiences are also included concerning co-operation between decision-makers and 'model-builders', which is essential if simulation models are to be used effectively for development planning.