Government Expenditure and Public Sector Corruption in Kenya

Abstract

This study aims to establish the relationship between public sector corruption and government expenditure in Kenya. Whereas it is widely agreed in literature that corruption is a constraint to economic development and economic growth, the link between public expenditure and corruption is widely ignored especially in Kenya. The main focus of previous studies has been to link corruption to economic growth or public expenditure to economic growth. By recognizing that corruption influences budgetary composition and it targets sectors that are susceptible to high bribes, this study answers the question of how corruption influences public expenditure. We use a case study of Kenya because on average, it is the 23rd most corrupt country in the world as per Transparency International statistics that range from 1998 to 2017. Equally public expenditure is on the rise. Using time series data that ranges between 1984 and 2016, we analyze six long-run regression models where expenditure in education, defense/military, health, social protection, infrastructure and energy are dependent variables. Corruption, rate of urbanization, government expenditure, real GDP and tax income are used as explanatory variables. We conclude that corruption influences general public expenditure in Kenya. In addition, education and infrastructure sectors are significantly affected by corruption. Other sectors (energy, health, social and defense) are only influenced positively by corruption but this effect is not significant. These results are affirmed by an alternative long-run model, ARDL.