International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

The Impact of Public Expenditure Components on Economic Growth in Kenya 1964-2011
John Njenga Muthui, George Kosimbei, James Maingi, Gideon Kiguru Thuku

The purpose of this study was to find out the impact of public expenditure composition on economic growth in Kenya from 1964 to 2011. The specific objectives of the study were to investigate the impact of government expenditure on components: education, infrastructure, health, defense and public order and security on economic growth in Kenya. This study employed use of annual Kenyan data for the period 1964 to 2011 for all the variables. The study conducted Stationarity Test, Causality Test, Cointegration Tests before using vector error correction model to estimate the data. The survey showed that though government expenditure on education is positively related to economic growth it does not spur any significant change to growth. Based on this, investing in more and better-distributed education in the labor force will help create conditions that could lead to higher productivity and higher economic growth. On health while an increased expenditure on improving health might be justified purely on the grounds of its impact on labor productivity. This supports the case for investments in health as a form of human capital. To reduce the huge budget outlay for importing medicine and drugs, this study recommended for government to support research and development in this sector locally It was also noted that the government should encourage programs like Build Operate and Transfer (BOT) to foster increased investment and provision of public utilities. As a result of this relationship between private and public investment, the government should come up with policies that brings a balance between the two.

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