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

Figures & data

Table 1: Some measurements of government size and expenditure elasticity of GDP

Year	Nominal government expenditure (current prices)	Growth rate of nominal government expenditure	Government expenditure (% of GDP)	Real government expenditure	Real government expenditure index (1990 = 100)	Growth of real government expenditure	Recurrent expenditure (% of total)	Development expenditure (% of total)	Expenditure elasticity of GDP
1970	0.4679	18.4	21.0	467.900	183.9	18.4	65.3	34.7	0.9
1971	0.5238	12.0	21.0	523.800	181.6	11.9	64.0	36.0	3.4
1972	0.5431	3.7	19.3	543.100	141.4	3.7	56.2	53.8	24.5
1973	0.5485	1.0	15.7	548.500	117.0	1.0	71.2	28.8	0.9
1974	0.7541	37.5	16.2	377.050	70.0	–31.0	73.5	24.5	0.3
1975	1.1462	52.0	21.7	573.100	109.3	52.0	69.3	30.7	0.8
1976	1.484	29.5	22.7	742.000	143.7	29.5	67.2	32.8	1.6
1977	2.1366	44.0	19.1	712.200	148.3	–4.0	77.0	23.0	1.8
1978	3.1648	48.1	15.1	263.733	40.6	–63.0	81.4	18.6	1.0
1979	4.2957	35.7	15.2	226.090	88.8	–14.3	87.3	12.7	6.0
1980	4.668	8.7	10.9	166.714	57.8	–26.3	82.0	18.0	1.1
1981	7.7193	65.4	10.6	126.546	33.0	–24.1	89.5	9.5	0.8
1982	9.530	23.5	11.0	128.784	27.5	1.8	90.4	10.6	2.1
1983	14.7553	54.8	7.9	89.426	15.9	–30.6	90.8	10.2	0.6
1984	26.694	80.9	9.8	115.558	22.0	29.2	85.0	15.0	0.4
1985	45.763	71.4	13.3	180.169	34.9	55.9	84.0	16.0	1.0
1986	70.6607	54.4	13.8	222.904	46.4	23.7	86.1	13.9	1.0
1987	102.135	44.5	13.7	230.553	35.5	3.4	78.9	21.1	1.0
1988	143.897	40.9	13.7	247.247	97.1	7.2	77.1	22.9	1.5
1989	196.466	36.5	13.9	269.501	105.9	9.0	75.7	24.3	0.6
1990	254.473	29.5	12.5	254.473	100	–5.6	77.9	22.1	0.3
1991	340.262	33.7	14.1	288.358	113.3	13.3	77.5	22.5	0.6
1992	498.813	46.6	17.8	383.997	133	33.2	74.8	25.2	0.8
1993	760.911	52.5	21.0	468.830	122.1	22.1	78.4	21.6	1.0
1994	1141.312	50	22.1	563.055	120.1	20.1	73.5	26.5	1.0
1995	1698.700	48.8	22.0	525.588	93.3	–6.7	71.8	28.2	1.6
1996	2446.279	44.0	22.2	516.420	98.2	–1.7	75.0	25.0	0.4
1997	2908.965	18.9	20.6	480.186	93.0	–7.0	78.1	21.9	1.8
1998	4513.200	55.1	26.1	649.942	135.4	35.4	76.3	23.7	2.3
1999	4964.300	10.0	24.1	635.959	249.9	–2.12	71.5	29.5	0.5
2000	7675.400	54.6	28.3	785.448	308.7	23.51	66.9	33.1	1.7
2001	9053.700	18.0	23.8	696.582	273.7	–11.33	70.4	29.6	0.4
2002	12194.900	34.7	25.0	809.432	318.1	16.20	76.6	23.4	1.2
2003	18946.200	55.4	28.6	1017.431	299.8	25.7	72	28	0.6
2004	23952.700	26.4	30.5	1149.497	351.7	13.0	68	32	0.7
Source: Computations by the author using data from the Ghana Statistical Service, African Development Indicators (2005 and 2006) and various budget statements (Government of Ghana).

Table 2: Trends and structure of public expenditure in Ghana, 1970–2004: some major components

Year	Roads and waterways	Social security/social welfare	General administration	Interest payment	Wage bill^a	Defence	Health	Education	Transport and communication	Mining, manufacture and construction	Interest payment^a	Health^a	Education^a	Wage bill^a
1970−1983	7.0	−	18.5	12.4	27.8	7.7	8.6	19.1	3.5	−	2.0	−	2.9	−
1984	7.1	4.2	17.5	13.0	19.8	6.0	8.5	20.2	1.9	2.5	1.3	0.8	2.0	2.0
1985	5.6	4.9	18.5	11.1	32.7	6.5	8.7	22.3	4.0	1.3	1.5	1.2	3.0	4.4
1986	3.8	5.3	13.1	16.0	39.5	6.5	8.3	24.0	3.8	1.5	2.2	1.1	3.3	5.5
1987	8.4	6.4	9.7	10.4	37.5	4.2	9.3	26.5	2.9	1.8	1.4	1.3	3.6	5.1
1988	8.6	6.9	13.5	8.3	34.2	3.2	9.0	25.7	1.8	1.2	1.1	1.2	3.5	4.7
1989	7.6	7.3	13.0	9.5	34.6	3.1	10.1	24.3	1.2	1.1	0.8	1.4	3.4	4.8
1990	6.3	7.2	13.1	10.7	34.6	3.5	10.1	25.5	1.3	1.0	1.3	1.3	3.2	4.3
1991	8.3	7.0	12.3	12.6	31.5	4.5	8.4	23.2	1.3	0.9	1.8	1.2	3.2	4.4
1992	10.3	7.0	12.2	12.3	34.9	3.6	7.8	24.0	0.8	1.0	2.2	1.4	4.3	6.3
1993	9.1	9.0	10.3	17.9	33.0	3.5	7.8	20.8	0.8	1.1	3.5	1.5	4.0	6.5
1994	7.1	7.2	14.7	20.2	28.7	3.2	4.9	18.7	0.6	2.6	4.4	1.1	4.1	6.3
1995	11.2	8.3	12.6	19.4	27.9	3.5	6.6	19.4	0.3	0.8	4.2	1.4	4.3	6.1
1996	11.2	7.1	13.9	23.7	26.9	3.0	5.0	18.4	0.3	0.9	7.5	1.5	4.0	8.5
1997	8.9	7.2	12.9	29.0	27.8	3.5	4.5	19.0	0.2	0.6	6.0	1.4	3.9	5.7
1998	7.4	5.1	10.6	23.8	22.6	3.6	4.2	15.7	0.2	0.5	6.2	1.1	4.1	5.9
1999	8.5	−	−	21.3	21.5	3.0	5.3	18.3	−	−	5.6	1.3	4.4	5.2
2000	10.2	−	−	27.0	18.9	4.2	5.6	20.5	−	−	7.5	1.6	5.8	5.3
2001	11.2	−	−	24.0	18.6	4.0	5.8	16.5	−	−	7.8	1.4	4.1	4.4
2002	11.1	−	−	23.5	32.5	3.7	9.2	14	−	−	6.1	2.3	3.9	8.1
2003	12.6	−	−	22	29.1	3.9	4.9	16.2	−	−	6.5	1.4	4.0	8.3
2004	13.0	−	6.7	21	−	3.8	8.0	18.2	−	−	6.4	2.4	5.5	8.7
Note: % of total expenditure and/or as % of GDP.
^aExpressed as a percentage of GDP.
Source: Computations by the author using data from the Ghana Statistical Service, African Development Indicators (2005 and 2006) and various budget statements.

Table 3: Estimation of the growth model with aggregate expenditure

Independent variable	Coefficient estimate	t statistic
Constant	−2.22	−0.89
L	0.70	1.13
XR	0.04	1.62
IY	0.30∗∗	2.36
GGY	−0.50∗∗	−2.38
R ^2 = 0.24	DW = 1.72
Note: DW, Durbin–Watson statistic.
Source: Author's own computation.

Table 4: Estimation of growth model with disaggregated expenditures plus political economy variables

Independent variable	Coefficient estimate	t statistic
Constant	−3.17	−0.54
L	0.38	0.64
XR	0.05∗	1.97
IY	0.01	0.03
RG	0.18∗∗	2.73
EG	−0.30	−0.92
HG	1.15∗∗	2.03
POLINS	−3.62∗∗	−2.16
DEMOCRA	4.11∗	1.88
R ^2 = 0.43	DW = 1.810
Note: DW, Durbin–Watson statistic.
Source: Author's own computation.

Table 5: Political changes and economic performance in Ghana (1965–2004)

Year	Inflation	Real GDP growth (%)	Exchange rate (US$)	Government expenditure (% GDP)	Political change
1965	22.7	1.37	1.02	−
1966	14.8	0.09	1.02	−	MT
1967	−9.7	−3.00∗	1.02	21.3	A
1968	10.7	6.42	1.02	23.5	A
1969	6.5	5.85	1.02	19.8	E
1970	3.0	6.76	1.02	21.0
1971	8.8	5.56	1.82	21.0
1972	10.7	−2.79∗	1.28	19.3	MA
1973	17.0	15.21	1.15	15.7	A
1974	18.7	3.39	1.15	16.2
1975	24.5	−12.86∗	1.15	21.7	P
1976	62.1	−3.52∗	1.15	22.7	A3
1977	116.5	2.26	1.15	19.1
1978	73.1	8.48	2.75	15.1	P
1979	54.4	−3.17∗	2.75	15.2	ME
1980	50.1	0.00	2.75	10.9	MT
1981	116.5	−1.79∗	2.75	10.6	A4
1982	22.3	−7.20∗	2.75	11.0	A3
1983	122.8	−4.4∗	30	7.9
1984	39.6	8.7	50	9.8
1985	10.4	8.6	59.99	13.3
1986	24.6	5.20	90.01	13.8
1987	39.8	4.79	176.06	13.7
1988	31.4	6.23	229.89	13.7
1989	25.2	5.1	303.03	13.9
1990	37.2	3.3	344.83	12.5
1991	18.0	5.3	390.63	14.1
1992	10.1	3.9	520.83	17.8	E
1993	25.0	5.0	819.67	21.0
1994	24.9	3.8	1052.63	22.1
1995	27.9	4.5	1446	22.0
1996	46.2	5.2	1740	22.2	E
1997	27.9	4.2	2250	20.6
1998	17.7	4.6	2346	26.1
1999	12.4	4.4	3500.69	24.1
2000	25.2	3.7	5346.27	28.3	E
2001	35	4.2	7103.06	23.8
2002	32.9	4.5	7987.29	25.0
2003	23.6	5.2	8524.86	28.6
2004	11.9	5.8	8768.72	30.5	E
Notes: ∗Slump in output. MT, military takeover; Ai, attempted coup (number in the year); P, palace coup; E, general elections.
Source: Sowah (1994), updated and modified by author from 1995 to 2004.

Table 6: Results for Granger-Causality test

Null hypothesis	F statistics	Probability
GGY does not Granger-Cause g	2.65	0.10
g does not Granger-Cause GGY	3.78	0.02∗∗
g does not Granger-Cause RG	3.59	0.03∗∗
RG does not Granger-Cause g	1.29	0.30
g does not Granger-Cause EG	0.54	0.66
EG does not Granger-Cause g	2.15	0.12
g does not Granger-Cause HG	0.34	0.80
HG does not Granger-Cause g	2.12	0.12
∗∗Significant at 5% level.
Source: Author's own computation.

SOWAH , N K . 1994 . Governance and economic performance in Ghana , Legon-Accra : Department of Economics, University of Ghana . Legon Economic Studies Working Paper No. 9403

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