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

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