Impact of government size on economic growth the case for Kenya (1970- 2002)

Abstract

The objective of this study is to investigate the impact of government size on the economic growth in Kenya using for the period 1970-2002. The theoretical foundation is based on Yasin (1995) where the government expenditures are considered as inputs in the production process. The government expenditures are disaggregated into the recurrent and development expenditures. The former is expected to be growth retarding and unproductive, while the latter growth promoting. Other factors explaining Kenya's economic performance like debt overhang, level of macroeconomic development, openness and human capital development have also been incorporated in the model. Development and recurrent expenditures relate negatively to economic growth though the latter's effect is non-significant. Macroeconomic environment proxy and human capital development show a positive relationship. Trade openness and external debt relates negatively to economic growth. Government expenditures contribute negatively to economic growth in Kenya. The inefficiency characterizing these expenditures is clear proof of why this is so. There is need therefore to improve their productivity using efficiency among other things, in order to improve on the level of economic growth