Abstract

Understanding the impact of government expenditure in promoting economic growth is becoming increasingly important in Malawi, given the increased government expenditure and sluggish economic growth. This study investigates the impact of disaggregated government expenditure on economic growth in Malawi using time series data from 1980 to 2019, focusing on sectoral government expenditures in education, health, transport and communication and agriculture. The objective of the study was to establish whether components of government expenditure have any impact on economic growth. Employing the Auto-Regressive Distributed Lag (ARDL) model,the study found that the growth effects of government expenditure vary at disaggregated levels. The study results show that health public expenditure has positive long run impact on economic growth in Malawi. The study also show that government spending on transport and communication sector has positive effect on economic growth in Malawi in the long-run. Results from the study, however, reveal that government spending in education and agriculture sectors has an insignificant impact on economic growth in the long-run. Short-run results revealed that government expenditure on health, education, agriculture and transport and communication sectors have a significant impact on economic growth in Malawi. Given the positive and significant long-run impact of governmentspending in the health and transport and communication sector, the study recommends that reforming public expenditure in favour of these two sectorsis paramount in stimulating long-term economic growth in Malawi. The positive impact of government expenditure in the health sector also supports the call for Government of Malawi under the Abuja Declaration to ensure that it allocates at least 15% of budgetary funds every year towards health sector in order to promote human capital development and economic growth.

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School	: School of Law, Economics and Government
Issued Date	: 2021

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