Impact of Government Expenditure on Economic Growth Essay Example
CHAPTER ONE
INTRODUCTION
I.0 INTRODUCTION
1.1 BACKGROUND TO STUDY According to Wikipedia encyclopedia, Economic growth refers to the increase in the amount of goods produced by a country; this is a measure of the economic performance of the country while government expenditure is refered to as an outflow resources from government to other sectors of the economy, government expenditure (or government spending) includes all government consumption, investment but excludes transfer payments made by the state. Government expenditure is subdivided into recurrent and capital expenditures. Capital expenditure can be defined as payment for non-financial assets used in production for more than one year, e.g. expenses incurred on capital projects such as electricity generation, telecommunication, roads e.t.c. while recurrent expenditures are payments for non-repayable transactions within a year e.g. salaries, wages, interest on loans, maintenance e.t.c (CBN, 2003).
There has been a recent revival of interest in growth theory which has also sparked interest among researchers in verifying and understanding the linkages between government spending and economic growth especially in developing countries like Nigeria. One of the major functions of government spending is to provide infrastructural facilities, so also does the maintenance of these facilities require a substantial amount of spending. Over the past decades, the public sector spending has been increasing in geometric term through government various activities and interactions with its Ministries, Departments and Agencies (MDA’s), (Niloy et al.2003).
Some scholars argue that an increase in public expenditure either recurrent or capital expenditure, notably on social and economic infrastructure can be growth enhancing though the sources of financing such expenditures to provide essential infrastructural facilities including transport, electricity, potable
INTRODUCTION
I.0 INTRODUCTION
1.1 BACKGROUND TO STUDY According to Wikipedia encyclopedia, Economic growth refers to the increase in the amount of goods produced by a country; this is a measure of the economic performance of the country while government expenditure is refered to as an outflow resources from government to other sectors of the economy, government expenditure (or government spending) includes all government consumption, investment but excludes transfer payments made by the state. Government expenditure is subdivided into recurrent and capital expenditures. Capital expenditure can be defined as payment for non-financial assets used in production for more than one year, e.g. expenses incurred on capital projects such as electricity generation, telecommunication, roads e.t.c. while recurrent expenditures are payments for non-repayable transactions within a year e.g. salaries, wages, interest on loans, maintenance e.t.c (CBN, 2003).
There has been a recent revival of interest in growth theory which has also sparked interest among researchers in verifying and understanding the linkages between government spending and economic growth especially in developing countries like Nigeria. One of the major functions of government spending is to provide infrastructural facilities, so also does the maintenance of these facilities require a substantial amount of spending. Over the past decades, the public sector spending has been increasing in geometric term through government various activities and interactions with its Ministries, Departments and Agencies (MDA’s), (Niloy et al.2003).
Some scholars argue that an increase in public expenditure either recurrent or capital expenditure, notably on social and economic infrastructure can be growth enhancing though the sources of financing such expenditures to provide essential infrastructural facilities including transport, electricity, potable