Urbanization without structural transformation? : a case study of the Nairobi metropolitan area

Using data from Kenya's 2016 Micro, Small and Medium Enterprises survey, the 2017 Census of Establishments, key informant interviews, and focus group discussions, this paper examines the patterns of structural transformation as well as its drivers and barriers in Nairobi. The findings show that the pattern for employment shares by sector over time suggest movements of labour into the service sector. While the movements are largely into non-business activities, business-related activities have also picked up, an indication of the rapid expansion of the ICT sub-sector. We find some disparities in the employment shares by sector between Nairobi's constituencies. Labour productivity at the sub-county level is generally low. Analysis of the correlates of labour productivity in Nairobi suggest that spatial effects matter. Larger businesses, formal firms, and older businesses tend to be more productive. Findings from the qualitative analysis indicate that structural transformation is hindered by political constraints, such as political interference and instability, inadequate government support services due to power contestations between national and county government, unregulated/unrecognized service producers (cartels), among other factors.