Moderating Effect of Corruption on the Relationship Between Current Expenditure and Sectoral Economic Growth in Kenya

Brenda Molonko ,Ambrose Jagongo ,Job Omagwa

doi:10.7176/dcs/9-5-07

Abstract

The purpose of this paper was to determine the effect of current expenditure on sectoral economic growth in Kenya as well as the moderating effect of corruption on the relationship. The study covered the period 2006-2015 using Auto Regressive Distributed Lag Model (ARDL) estimation while adopting positivist philosophy and a causal research design. Secondary data from a target of 11 sectors that receive government expenditure was collected from Kenya National Bureau of Statistics, Statistical Abstracts, Kenya National Audit Office reports and Transparency International reports. Hausman Test, Panel Stationarity Test and Heterogeneity Test were conducted as preliminary tests. The study found that current expenditure has a significant effect on sectoral economic growth in the long run and no effect in the short run. The study further found that corruption has a significant moderating effect on the relationship between current expenditure and sectoral economic growth in the long run at the significance level of 0.05. The study concluded that current expenditure has no effect on sectoral economic growth in Kenya in the short run and a negative effect in the long run. As well, corruption has a moderating effect in the long run. The study recommends shrinkage of current expenditure. Additionally, the government should reduce the levels of corruption to accelerate growth through thorough scrutiny of government expenditures and proper control measures be meted. Keywords: sectoral economic growth, current expenditure, corruption DOI : 10.7176/DCS/9-5-07 Publication date :May 31 st 2019

Highlights

Background to the StudyThe government essentially performs two functions that is: protection which entails creation of the rule of law and enforcement of property rights: and provision of public goods and services which include roads, education, health and electricity (Economics Online, 2015). Loto (2011) on the other hand postulates that better standards of living to the citizens of a country will be achieved through the development of key sectors of the economy such as health, housing, education and agriculture, as these sectors are important in stimulating the economy of a country by addressing the nation’s foremost needs, bringing about sustainable development
7.0 Conclusion The results from Pooled Mean Group (PMG) estimator indicate that current expenditure has no effect on sectoral economic growth in the short run and a negative effect in the long run
Current expenditure is largely composed of salaries and wages for government employees

Summary

Introduction

Background to the StudyThe government essentially performs two functions that is: protection which entails creation of the rule of law and enforcement of property rights: and provision of public goods and services which include roads, education, health and electricity (Economics Online, 2015). Loto (2011) on the other hand postulates that better standards of living to the citizens of a country will be achieved through the development of key sectors of the economy such as health, housing, education and agriculture, as these sectors are important in stimulating the economy of a country by addressing the nation’s foremost needs, bringing about sustainable development. The proportion of current expenditure reached over 90% between the years 1997 and 2000 due to large expenditure incurred to finance the general election of 1997 and higher salary rewards to teachers and civil servants. Thereafter, it declined reaching below 71 % in the year 2007. The share of current expenditure to aggregate public spending declined from 89.4% in the financial year 2004/05 to 67.6% in the financial year 2011/2012 This was accompanied by rise in the share of government expenditure allocated to development projects (Wanjiku, 2013).

Objectives

Methods

Conclusion