Government expenditures and the Kenyan economic growth
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Date
2026-11
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Kenyatta University
Abstract
The economic growth of a nation is key to that economy as it contributes significantly to the development and well-being of that economy. These benefits are dependent on many factors including government expenditures that need to be addressed through the management of the country’s fiscal policies. Ideally, a country's economic growth is anticipated to enhance lifestyles by providing education, healthcare access, infrastructure, housing, quality food availability, improved roads, and similar amenities. However, this is not always the case. The economic growth of Kenya has recently attracted attention due to widespread volatility in its growth and inability to hit its Vision 2030 target growth of 10% despite huge investment in expenditure by the government. Therefore, the intent of this research is to ascertain the effect of government expenditure on economic growth in Kenya. In particular, the research ascertained the effect of education expenditure, health expenditure, defense and security expenditure, and social services expenditure on the economic growth of Kenya. The research was underpinned on the public finance theory, the theory of maximum social advantage, endogenous economic growth, and Peacock and Wiseman Theory. The causal-effect research approach was utilized in the research. The target audience was Kenya as a country with twenty five observations from 2000 to 2024 which is the unit of analysis. Secondary data was gathered with the aid of documentary guides and data sheets from the World Bank and KNBS. STATA software version 14 was used. Diagnostic tests (Auto correlation, multicollinearity, heteroscedasticity, normality, Co-integration, and unit root test) will be carried out before data analysis. VAR time series regression model was adopted. Descriptive statistics involving the use of frequencies, mean and standard deviation, and, inferential statistics was adopted in data analysis; and displayed in frequency distribution tables, charts, and graphs. The research's results indicate that education expenditure, health expenditure and Defense and security expenditure substantially influenced Kenya's economic growth with pvalues of 0.000, 0.000 and 0.005 respectively. On the other hand services expenditure insignificantly influences economic growth in Kenya with p-value of 0.125. The research recommend that Kenya government should invest in education that provide its citizen with the necessary skills to be utilized in the labour market that will foster economic growth. Additionally, the research recommends that the government should invest in the health program (SHA and UHC) for its citizen that will provide a population health to the masses which will eventually lead to high productivity and hence economic growth. Finally, the research recommends the Kenyan government to secure the country using both physical and technological means that will enhance peace for the country men and women to concentrate to work leading to economic growth
Description
A research project submitted to the school of business, economics and tourism in partial fulfillment of the requirements for the award of the degree of Masters in Business administration (Finance option) of Kenyatta University. November 2025
Supervisor:
Dr. Vincent Shiundu Mutswenje