Government Sectoral Expenditure and Economic Growth

Abstract:

The major objective of this study is scrutinizing the impact of government sectoral expenditure on economic growth in East African countries over the period from 1985 to 2015. It focuses on sectoral expenditures on health, education, defence and agriculture segments. The main contribution of this research is examining expenditure components in line with current government categorization to establish these sectoral budget allocations that have impact on economic growth in order to provide a guide for policy formulation. This study uses secondary data which are obtained from Statistical Abstracts and World Bank reports. The growth impact of government expenditure is estimated by panel Ordinary Least Squares (OLS) technique and fixed effect estimation method to examine the relationship between the variables. The empirical results show that agriculture and education expenditure have an insignificant impact on economic growth and productivity. The regression results further show a significant positive impact on economic growth of expenditure on health and defence. To boost economic growth and productivity a well-defined expenditure strategy and efficient management of budgetary resources allocated to all sectors should be accentuated in East Africa.