Effect Of Public Expenditure On Economic Growth In Kenya: 1963 2015

Abstract

This study sought to examine the effect of public expenditure on economic growth in Kenya between 1963 and 2015. To establish which specific components of government expenditure, have significant effects on economic growth. Public expenditure was disintegrated into two major components; development and recurrent expenditure. The dependent variable was economic growth expressed as real GDP while the independent variables were the expenditure components. The study used secondary data extracted from Economic Surveys, Statistical Abstracts published by the Kenya National bureau of Statistics, Kenya Institute of Public Policy Research and Analysis and the Ministry of Devolution and Planning. The study applied Vector Auto Regression estimation technique using annual time series data for the period 1963 to 2008 to evaluate the effect of government expenditure on economic growth. The study used a Distributed Lag Model with lagged explanatory variables to explain the relationship between economic growth and public expenditure. The ARDL was used to test the causal link between public expenditure and economic growth in Kenya during the period. The long run regression results showed that the effect of public expenditure components on economic growth was nonsignificant. The study recommended that the government encourage programs that foster increased public investment for increased economic growth.