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Quarterly Journal of Econometrics Research

June 2017, Volume 3, 1, pp 1-11

Public Sector Size and GDP Growth Nexus: Panel Data Estimation

Naftaly Gisore Mose

Naftaly Gisore Mose 1

  1. Department of Economics, Technical University of Kenya, Nairobi, Kenya 1

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on PubMed

Pages: 1-11

DOI: 10.18488/journal.88.2017.31.1.11

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Article History:

Received: 04 April, 2017
Revised: 18 July, 2017
Accepted: 27 July, 2017
Published: 07 August, 2017


Abstract:

The rationale of this study was to examine empirically how components of public sector size relates to GDP growth in East Africa from 1985-2015. Using balanced panel fixed or random effect model, public sector expenditure was disaggregated to scrutinize its effect of growth. The research tested for panel unit root and found that only two variables, that is, real GDP growth and capital spending - are stationary at level. The finding confirms the conventional view that relative capital spending - advances economic growth while consumption expenditure retards it. Finally, human capital allocation was insignificant. This study suggests that for these countries, the policy of increasing public sector size on investment budget to promote GDP growth will be appropriate, but fewer funds should be directed towards other governmental programs.

Contribution/ Originality
This study contributes in the existing literature in the field of public sector economics. This study uses panel estimation methodology. This study originates new formula of estimating public sector size.

Keywords:

Public sector size, Government spending, GDP growth, East Africa, Panel data.

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Funding:

This study received no specific financial support.

Competing Interests:

The author declares that there are no conflicts of interests regarding the publication of this paper.

Acknowledgement:


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