Public spending and economic growth: evidence from Ghana (1970–2004)

Abstract

Governments undertake expenditures to pursue a variety of objectives, one of which is economic growth. This paper examines aggregated and disaggregated expenditure on economic growth in Ghana over the period 1970–2004. Expenditure on education and health represents human capital development, while expenditure on roads and waterways captures infrastructure development. The study reveals that the aggregated government expenditure retarded economic growth. The study's findings show that expenditures on health and infrastructure promote economic growth, while those on education had no significant impact in the short run. In addition, the political economy variables−namely the nature of governance (democracy) and political instability (years of changes in government and military dictatorship)−proved significant in explaining Ghana's economic growth over the study period.

Keywords:

• Economic growth
• public spending
• human capital development
• political instability

Notes

¹See Table 5 for the ¢ (Ghanaian cedi)/US$ exchange rate dynamics.