Faculty Research at Morehead State University


Public Spending and Economic Growth: Empirical Investigation of Sub-Saharan Africa


Mesghena Yasin

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Existing studies on the relationship between government spending and economic growth provide inconclusive empirical evidence. This paper re-examines the effect of government spending on economic growth using panel data set from Sub-Saharan Africa. The model is derived from an aggregate production function in which government spending, foreign assistance for development and trade-openness are explicitly specified as input factors. Fixed-effects and random-effects estimation techniques were applied to the model. The results from both estimation techniques indicate that government spending, trade-openness, and private investment spending all have positive and significant effect on economic growth. Foreign development assistance and the growth rate in population are statistically insignificant. A test of a restricted version of the model indicates that the contributions of foreign development assistance and the growth rate in population on economic growth are statistically zero.