The purpose of this study was to analyze the effect of crime on economic growth with the specific objective of determining the effect of economic crime on economic growth in Kenya.  The study employed correlational research design involving correlation analysis, Ordinary Least Squares (OLS) analysis and Granger causality tests based on annual time series data spanning 8 years from 2006 – 2013. The results indicated that economic crime had a significant negative effect on economic growth in Kenya such that a percentage increase in economic crime decreased economic growth by 0.87%.

Executive Summary

The question of crime remains paramount for the development of Kenya both nationally and internationally given that Kenya serves as an economic and business hub for both national and international investors. Given that 52% of Kenyans might have experienced some form of economic crimes ranking Kenya above the Africa’s average of 50% and the global average of 37% raises concerns for policy makers in an attempt to understand its effects on the economy. However, available studies have focused on the relationship between overall crime or corruption and economic growth and failing to provide the specific relationship between economic crime and economic growth.The purpose of this study was to analyze the effect of crime on economic growth with the specific objective of determining the effect of economic crime on economic growth in Kenya.  The study employed correlational research design involving correlation analysis, Ordinary Least Squares (OLS) analysis and Granger causality tests based on annual time series data spanning 8 years from 2006 – 2013.The results indicated that economic crime had a significant negative effect on economic growth in Kenya such that a percentage increase in economic crime decreased economic growth by 0.87% which may be attributed to the fact that economic crimes discourages investment, savings and culture of hard work among Kenyans due to increased fraud, bribery and corruption. There was also unidirectional causality running from economic crime to economic growth. The study recommended that inorder to promote growth in Kenya economic crimes need be reduced which may be achieved by the government adopting policies that criminalizes economic crimes and target prominent personalities including politicians, cabinet secretaries, judges, civil servants among others. This will deter any Kenyan from engaging in economic crimes.

KEYWORDS: Economic crime; economic growth, Kenya, landlocked countries