The Impact of Government Expenditure on Economic Growth in Ethiopia

Abstract

The goal of this research was to investigate empirically how government expenditure contributed to economic growth in Ethiopia. Most existing studies examining the relationship between expenditure and economic growth show conflicting results and mainly focused on aggregate expenditure. Hence, this study focused on disaggregated expenditure over the period from 1985 to 2008. The objective of the study was to establish these expenditures that had effects on growth using multi regression model. The findings showed that expenditures on agriculture, education, energy & mining to be positive and statistically significant effect on Ethiopian economic growth. In contrast, urban development and housing expenditure have negative and insignificant impact on Ethiopian Economic growth. Transportation and communication have positive and insignificant impact on Ethiopian economic growth. This study recommends the government of Ethiopia to give more emphasis on the agriculture, education, training, and mining & energy and appreciable to spent more fund in these sectors. In addition to this, the researchers recommend that the government of Ethiopia to minimize its expenditure on urban development and housing.