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The impact of government expenditure on economic growth in Kenya
Gitonga, Betty Muthoni
This thesis sought to understand the effect of government expenditure on economic growth in Kenya. The thesis was anchored by the theories of economic growth. Government expenditure was disaggregated into government investment and government consumption spending. The estimation also included control variables that determine economic growth these were labour force participation rate which captured labour, investment which captures the level of capital in the economy, inflation which indicates the macroeconomic conditions, gross secondary school enrolment to indicate the human capital, and political instability which indicates the institutional quality. The analysis was done using autoregressive distributed lag (ARDL). The thesis period was 1980 – 2022. In both the short-run and the long-run government consumption was found to have an insignificant effect on economic growth. Government investment was found to have a positive and statistically significant effect on economic growth in both the short-run and long-run. Investment had a positive and significant effect in both the short-run and long-run. In the short-run, the second lag of labour had a negative and statistically significant effect while in the long-run, the effect on economic growth was positive and statistically significant. Inflation was found to have a negative and statistically significant effect on economic growth both in the short-run and long-run. Political stability and human capital had an insignificant effect on economic growth both in the short-run and long-run during the period of the study.

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