Public Spending and Economic Growth: Empirical Investigation of Sub-Saharan Africa
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.
Southwestern Economic Review, Vol. 30, No. 1, Spring 2003, 59-68.