Exploring the role of government spending in fostering economic development in Kenya: an ARDL approach

Abstract

This study aims to examine the relationship between government spending and economic development in Kenya, given the lack of consensus on the topic globally. While there is an agreement that some level of government expenditure is necessary for economic development, the specific areas of spending that are most beneficial still need to be clarified. This study uses the auto regressive distributed lag(ARDL) model and a Support Vector Machine to explore the effect of public spending on the Kenyan economy from 1980 to 2021. The variables used in this study include GDP, infrastructure, education, health, and defense expenditures. This study hypothesizes that increased investment in infrastructure, health, education, and defense spending leads to accelerated economic development growth in Kenya. The results indicate that education has a negative effect on economic development in the short run but a positive effect in the long run, while health and defense spending have a positive impact on economic development Infrastructure spending has adverse impact on economic development in both the short and long run, but its correlation is low. This study suggests that Kenya should increase funding for education and health, maintain defense spending, and improve infrastructure spending while addressing corruption and bureaucracy.

Keywords

• Public spending
• education expenditure
• health expenditure
• infrastructure expenditure
• defense expenditure
• GDP growth