Effect of Various Categories of Government Expenditure on Economic Growth in Kenya

Abstract

In Kenya, government expenditure has been changing tremendously in its composition and size. Noticeably, since Kenya’s independence, government expenditure has witnessed great expansion. However, the country has not achieved consistent economic growth for a long duration of time. Despite the increase in allocation of resources through increasing public spending, economic growth has not grown at the same rate. As such, economic growth did not consummate with the increase in allocation of resources through government expenditure. The study sought to determine the effect of education expenditure, defense expenditure, health expenditure and infrastructure expenditure on economic growth. It used an explanatory research design and secondary time-series data for the period between 1985 and 2018. Data on education expenditure, defense expenditure, health expenditure as well as infrastructure expenditure and economic growth was acquired from Kenya National Bureau of Statistics. The quantitative data was collected, edited and coded into Statistical software known as STATA version 14. Analysis of the quantitative data was based on descriptive as well as inferential statistics. Correlation analysis was employed to assess the strength of correlation between independent and dependent variables whereas regression analysis determined the weight of association between independent and dependent variables. Diagnostic test was performed to test for the regression model assumptions before carrying out regression analysis. The research focused on autocorrelation test, stationarity test, autocorrelation test, normality as well as heteroscedasticity test. The study revealed that education expenditure had a positive effect on economic growth in Kenya. The study found that defense expenditure had a positive effect on economic growth in Kenya. The results revealed that health expenditure had a positive effect on economic growth in Kenya. In addition, the study found that infrastructure expenditure had a positive effect on economic growth. The study concludes that government expenditure has a significant effect on economic growth in Kenya. The study policy implication of the study is that Kenyan government as well as policy makers should formulate policies and guidelines geared towards increasing education expenditure. This will help in ensuring adequacy in a trained, qualified and productive labor that is important in ensuring an improvement in economic growth. In addition, the government of Kenya should allocate at least 15 percent of their total expenditure to the healthcare so as to ensure a productive and healthy workforce. The government also needs to increase infrastructure funding as recommended by the World Bank to between 7 and 9 percent.