The effects of governance and public expenditure on economic growth in Kenya

Abstract

In the recent past, the debate on the role of governance and public expenditure composition in fostering economic prosperity has been rife resulting to both theoretical and empirical studies proliferation. A large number of these studies have been cross country or panel data based. This study therefore sought to analyze the effects of governance quality and composition of public expenditure in Kenya using times series data. Using an OLS estimator, the two indicators of governance are found to positively and statistically significant impact on economic growth. The composition of public spending in six categories of the economy namely; defence, education, health, agriculture, transport and communication and social protection is also reviewed. The empirical findings indicate education, transport and communication and health positively impact on economic growth. The other outlays have negative impact on growth. The findings postulate it’s critical for developing countries like Kenya to seek the right mix of public spending levels and ensure quality governance if the desired development outcomes and economic growth is to be realised