Abstract
The direction and degree of relationship between government spending and reduction in unemployment has continued to generate series of debate among scholars. To empirically establish this relationship in the context of Nigeria, motivated this study. Secondary data sourced from the CBN Statistical bulletin were used to experiment on the disaggregated impact of government expenditure on administration, economic services, social community services and transfers have on the rate of unemployment in Nigeria. The Error Correction econometric model (ECM), the Johansen cointegration and the Granger causality tests were the central analytical tools used in the study. Our stationary test showed that the variables were non-stationary at levels but all were stationary at first difference. In the short-run, a positive relationship was observed. The short-run coefficient of economic services and unemployment was observed to be negative and the direction of causality was from government expenditure on economic services. Expenditure on social community service observed negative and statistically and observed a weak causal influence on unemployment. This highlights the unique case of underdeveloped nature of Nigerian economy. Interestingly, government expenditure on Administration were found to be positive and statistically significant and the direction of causality was from government expenditure on administrative expenses. However, there was no causal relationship between government expenditure on transfers and unemployment. There is, therefore, the need for policy makers to keep an eye on the trend and effects of changes in expenditure on administration and economic services, given that the result indicates that expenditure on them explains the employment behavior in Nigeria. Keywords: Government expenditure, disaggregated impact, employment generation DOI : 10.7176/JESD/10-16-01 Publication date : August 31 st 2019
Highlights
There exists some empirical nexus between rising level of unemployment and insecurity and other social vices, especially in developing countries such as Nigeria’s, where unemployment problem has remained one of major economic undesirables that have bedeviled the country
2.3 Evaluation of Reviewed Literature This area of study has generated sustained debates and controversies amongst scholars, both in the past and present. These controversies have led to the formulation of several theories relating to government spending and employment or unemployment, by reputable economists such as Classical theory, Keynes Economic Theory of Employment, Solow Growth theory and Wagner’s Theories of Government Expenditure
Expenditure on social community service indicated at lag 3 is negative and statistically significant at 5 per cent level while lag 1 and 2 were insignificant. This highlights the unique case of underdeveloped nature of Nigerian economy
Summary
There exists some empirical nexus between rising level of unemployment and insecurity and other social vices, especially in developing countries such as Nigeria’s, where unemployment problem has remained one of major economic undesirables that have bedeviled the country. Successive governments in Nigeria had elected to adopt various policies to create jobs and reduce unemployment. While primarily such policies are aimed at creating jobs, it is an instrument to boost economic growth and development, as well as stabilizing the polity. One of such policy is fiscal policy vis-à-vis government spending. Government spending represents the annual expenditure by federal government to achieve macroeconomic objectives which amongst others include: employment generation, increase in output, stability in general price level and balance of payments equilibrium (Obayori, 2016)
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