Effect of Budgetary Allocations on Performance of County Governments in Kenya

Abstract

This study was motivated by the need to understand how different budgetary components contribute to county-level economic outcomes. County performance is a crucial indicator of economic growth and development, making it essential to evaluate how government spending in various sectors influences this performance. The primary objective of this study was to assess the effect of budgetary allocations in healthcare, agriculture, infrastructure, own source revenue, and recurrent spending on county performance in Kenya. The study was anchored on resource-based view theory, and supported by public choice theory, and agency theory. Using secondary data from 47 counties over a five-year period (2019-2023), the study employed a multiple regression analysis to establish the relationships between the dependent variable (county performance) and the independent variables (healthcare, agriculture, infrastructure, own source revenue, and recurrent spending). The study also conducted diagnostic tests, including multicollinearity, normality, heteroscedasticity, stationarity, and autocorrelation tests, to ensure the robustness of the regression model. The regression analysis reveals that budgetary allocations to healthcare (β =0.426, p = 0.009), agriculture (β =β =1.070, p = 0.003), infrastructure (β =β =0.341, p = 0.004), and own source revenue (β =β =1.028, p = 0.000) have a positive and statistically significant impact on county performance. This indicates that increased funding in these areas contributes significantly to economic growth at the county level. However, recurrent spending (β =β =-0.775, p = 0.670) shows a negative but statistically insignificant relationship with county performance, suggesting that excessive recurrent expenditure may not be as beneficial to economic growth. The model's R-squared value of 0.5751 indicates that approximately 57.51% of the variation in county performance is explained by the independent variables included in the model, confirming the model's overall fit and relevance. The study concludes that strategic allocation of resources to key sectors such as healthcare, agriculture, and infrastructure is essential for enhancing county-level economic performance in Kenya. Additionally, the positive impact of own source revenue highlights the importance of counties' financial independence and efficiency in revenue collection. Based on these conclusions, the study recommends that county governments should increase their budgetary allocations to healthcare, agriculture, and infrastructure to foster economic growth. Additionally, enhancing own source revenue generation capabilities can significantly improve county performance. For further research, the study suggests exploring the impact of budgetary allocations on other aspects of county performance, such as social development indicators and public service delivery.