Public Expenditure in the Social Sector and Economic Growth in Kenya

Abstract

The objective of this study was to investigate the effect of public expenditure in the social sector on economic growth in Kenya. To this end, the autoregressive distributed lag (ARDL) modeling framework was used to disentangle the economic growth effects of public expenditure in the social sector into short-run and long-run. The study focused on expenditure on three sectors that are relevant for human capital development namely, education, health, and social security. The results showed that education had a positive short-run and long-run effects on real gross domestic product (GDP) per capita. Health and social security expenditure, on the other hand, appeared to dampen economic growth. In light of these findings, the study calls for improved expenditure on education. Further, public expenditure in the health and social security sub-sectors should be channeled to productive investments.

Keywords: Kenya, expenditure, education, health, social security