The effects of institutional and a-institutional factors on growth of government spending in Kenya(1963-2011).

Abstract

This study investigated the long run and short-run dynamic relationships between real government spending per capita and its potential determinants in Kenya using time series data for the period 1963-2011. The study employed the autoregressive distributed lag approach to co-integration. The specific objectives of the study were to determine the relative effects of a-institutional factors in determining in determining real government spending in Kenya. The data used were government spending per capita, gross national income per capita, population, tax share, inflation rate, openness, and an election dummy variable. Sources of data were International Financial Statistics and Kenya government publications. The F-test co-integration results revealed that a long-run co-integrating relationship exists between government spending per capita, per capita income; inflation, the tax share, wage rate and trade openness but not with population. The study also finds that per-capita income seems to be the most significant factor in explaining the dynamics of government spending growth in Kenya. The results of the short-run dynamics indicate that the speed of adjustment seems relatively high. The cusumsq results established that the estimated model seems stable. The study concludes that institutional and a-institutional factors affect the growth of real government spending in Kenya