EFFECT OF GOVERNMENT AGRICULTURAL EXPENDITURE ON ECONOMIC GROWTH: EVIDENCE FROM A DEVELOPING COUNTRY
DOI:
https://doi.org/10.2478/subboec-2022-0006Keywords:
Government Expenditure, Agriculture Sector, Economic Growth, Keynesian HypothesisAbstract
Fiscal policy has been used by various governments to promote economic growth. The effectiveness of government expenditure on economic growth depends on recipient sector of government expenditure. This study contributes to this research area by investigating the effect of government agricultural expenditure on economic growth in the Kingdom of Lesotho. The government of Lesotho identified the agricultural sector as a productive sector that is central to the achievement the economic growth goal and development plan. Descriptive statistics and inferential econometric techniques (ARDL, DOLS and VEC Granger causality) over time-series data for the period 1982-2019 were utilized in this study. The results suggest that while current level and pattern of government agriculture expenditure cannot stimulate the desired economic growth and prosperity in the country, domestic investment appear to be a stimulant of the desired economic prosperity. Consequently, any economic growth policy or strategy that is premised on government agricultural sector expenditure would fail. Thus study recommends that countries including Lesotho should prioritize sustained increase in domestic investment.
JEL Classification: H50, Q14, O10
References
Ahuja D., Pandit D. (2020) Public expenditure and economic growth: Evidence from the developing countries. FIIB Business Review, 9(3), 228-236
Aslan A., Altinoz B. (2021) The impact of natural resources and gross capital formation on economic growth in the context of globalization: evidence from developing countries on the continent of Europe, Asia, Africa, and America. Environmental Science and Pollution Research, 28(26), 33794-33805
Amusa K., Oyinlola M. A. (2019) The effectiveness of government expenditure on economic growth in Botswana. African Journal of Economic and Management Studies, 10(3), 368-384
Anríquez G., Stamoulis K. (2007) Rural development and poverty reduction: is agriculture still the key? ESA Working Paper No. 07-02, FAO
Ansari M. I., Gordon D. V., Akuamoah C. (1997) Keynes versus Wagner: public expenditure and national income for three African countries. Applied Economics, 29(4), 543-550
Arestis P., Şen H., Kaya A. (2021) On the linkage between government expenditure and output: empirics of the Keynesian view versus Wagner’s law. Economic Change and Restructuring, 54(2), 265-303
Armas E. B. Osorio C. G., Moreno-Dodson B., Abriningrum D. E. (2012) Agriculture public spending and growth in Indonesia, Policy Research Working Paper 5977 2012, World Bank
Atkinson A. B., Stiglitz J. E. (2015) Lectures on public economics. Princeton University Press
Barro R. J. (1996) Determinants of economic growth: A cross-country empirical study. National Bureau of Economic Research, working paper no.5698, August
Bassanini, A., Scarpetta, S., Hemmings, P. (2001) Economic growth: the role of policies and institutions. Panel data evidence from OECD countries. Panel Data Evidence from OECD Countries (January 2001)
Campo J., Mendoza H. (2018) Public expenditure and economic growth: a regional analysis for Colombia, 1984-2012. Lecturas de Economía, (88), 77-108
ChuT. T., Hölscher J., McCarthy D. (2020) The impact of productive and non-productive government expenditure on economic growth: an empirical analysis in high-income versus low-to middle-income economies. Empirical Economics, 58(5), 2403-2430
Cornia G. A., Martorano B. (2012) Development policies and income inequality: Main trends in selected developing regions, 1980–2010. United Nations Conference on Trade and Development (UNCTAD) Discussion Paper No.210, UNCTAD/OSG/DP/2012/4, Geneva, Switzerland
Cortright J. C. (2001) New growth theory, new growth theory, technology and learning: Technology and learning: A practitioner’s guide a practitioner’s guide. Reviews of economic development literature and practice, 4.
Dkhar D. S., De U. K. (2018) Public expenditure on agriculture and economic growth: a case study of Meghalaya. Agricultural Economics Research Review, 31(2), 271-279
Ebenezer M., Ngarava S., Etim N. A., Popoola O. (2019) Impact of government expenditure on agricultural productivity in South Africa. The Journal of Social Sciences Research, 5(12), 1734-1742
Ewetan O. O., Osabohien R., Matthew O. A., Babajide A. A., Urhie E. (2020) Fiscal federalism and accountability in Nigeria: An ARDL approach. Journal of Money Laundering Control, 24(2), 361-373
Garoma T., Bersisa M. (2018) Impact of government Sectoral expenditure on economic growth in Ethiopia. In Economic Growth and Development in Ethiopia, 105-136, Springer, Singapore
Gatsi J. G., Appiah M. O., Gyan J. A. (2019) A test of Wagner’s hypothesis for the Ghanaian economy. Cogent Business & Management, 6(1), 1647773
Gurdal T., Aydin M., Inal V. (2021) The relationship between tax revenue, government expenditure, and economic growth in G7 countries: new evidence from time and frequency domain approaches. Economic Change and Restructuring, 54(2), 305-337
Gyimah J., Yao X., Tachega M. A., Hayford I. S., Opoku-Mensah E. (2022) Renewable energy consumption and economic growth: New evidence from Ghana. Energy, 248, 123559
Haraguchi N., Martorano B., Sanfilippo M., Haraguchi N. (2019) What factors drive successful industrialization? Evidence and implications for developing countries. Structural Change and Economic Dynamics, 49, 266-276
Haseeb M., Kot S., Hussain H. I., Jermsittiparsert K. (2019) Impact of economic growth, environmental pollution, and energy consumption on health expenditure and R&D expenditure of ASEAN countries. Energies, 12(19), 3598
Ho S. Y., Iyke B. N. (2020) The determinants of economic growth in Ghana: New empirical evidence. Global Business Review, 21(3), 626-644
Le H. P. (2020) The energy-growth nexus revisited: the role of financial development, institutions, government expenditure and trade openness. Heliyon, 6(7), e04369
Lupu D., Petrisor M. B., Bercu A., Tofan M. (2018) The impact of public expenditures on economic growth: A case study of Central and Eastern European countries. Emerging Markets Finance and Trade, 54(3), 552-570
Maïga A., Bamba A., Sy B., Keita G., Mouleye I., Diallo M. (2021) Analysis of the Effects of Public Expenditure on Agricultural Growth in Mali. Asian Journal of Agricultural Extension, Economics & Sociology, 39(7), 42-50
Mazorodze B. T. (2018) Government expenditure and economic growth in Zimbabwe. African Journal of Business and Economic Research, 13(2), 183-202
Meyer D. F., Sanusi K. A. (2019) A causality analysis of the relationships between gross fixed capital formation, economic growth and employment in South Africa. Studia Universitatis Babes-Bolyai Oeconomica, 64(1), 33-44
Mogues T., Fan S., Benin S. (2015) Public investments in and for agriculture. The European Journal of Development Research, 27(3), 337-352
Mudaki J., Masaviru W. (2012) Does the composition of public expenditure matter to economic growth for Kenya. Journal of Economics and sustainable Development, 3(3), 60-70
Ndubuisi P. (2018) The role of government sectoral spending on productivity in Nigeria. Error correction analysis. Journal of Emerging Trends in Economics and Management Sciences, 9(1), 1-11
Natarajan V. K., Haq M. A. U., Sankar J. P. (2022) Causality between public expenditure and economic growth in the Kingdom of Bahrain. Middle East Journal of Management, 9(2), 209-225
Nguyen H. H. (2020) Impact of foreign direct investment and international trade on economic growth: Empirical study in Vietnam. The Journal of Asian Finance, Economics, and Business, 7(3), 323-331
Nnadozie E., Jerome A. (2019) Definition and measurement of growth and development. In African Economic Development. Emerald Publishing Limited.
National Strategic Development Plan (2018) National Strategic Development Plan 2018/19-2022/23. The Government of Lesotho
Nyambe J. M., Kanyeumbo J. N. (2015) Government and household expenditure components, inflation, and their impact on economic growth in Namibia. European Journal of Business, Economics and Accountancy, 3(4), 81-86
Odhiambo N. M. (2015) Government expenditure and economic growth in South Africa: An empirical investigation. Atlantic Economic Journal, 43(3), 393-406
Ogundari K., Awokuse T. (2018) Human capital contribution to economic growth in Sub-Saharan Africa: does health status matter more than education? Economic Analysis and Policy, 58, 131-140
Olaoye O. O., Orisadare M., Okorie U. U. (2020) Government expenditure and economic growth nexus in ECOWAS countries: A panel VAR approach. Journal of Economic and Administrative Sciences.36(3), 204-225
Onifade S. T., Çevik S., Erdoğan S., Asongu S., Bekun, F. V. (2020) An empirical retrospect of the impacts of government expenditures on economic growth: new evidence from the Nigerian economy. Journal of Economic Structures, 9(1), 1-13
Peacock A. T., Wiseman J. (1961) Determinants of government expenditure. In The growth of public expenditure in the United Kingdom (pp. 12-34), Princeton University Press
Pernechele V., Fontes F., Baborska R., Nkuingoua J., Pan X., Tuyishime, C. 2021. Public expenditure on food and agriculture in sub-Saharan Africa: trends, challenges and priorities. Rome, FAO
Pesaran M., Shin Y. (1999) An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. In S. Strøm (Ed.), Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium (Econometric Society Monographs, pp. 371-413). Cambridge: Cambridge University Press
Pesaran M. H., Shin Y., Smith R. J. (2001) Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
Petchko K. (2018) How to write about economics and public policy. Academic Press, United Kingdom
Pula L., Elshani A. (2018) Role of public expenditure in economic growth: Econometric evidence from Kosovo 2002–2015. Baltic Journal of Real Estate Economics and Construction Management, 6(1), 74-87
Ruiz J. L. (2018) Financial development, institutional investors, and economic growth. International Review of Economics and Finance, 54, 218-224
Ruttan V. W. (1965) Growth stage theories and agricultural development policy. Australian Journal of Agricultural Economics, 9, 17-32
Sáez M. P., Álvarez-García S., Rodríguez D. C. (2017) Government expenditure and economic growth in the European Union countries: New evidence. Bulletin of Geography. Socio-Economic Series, 36(36), 127-133
Salari M., Javid R. J., Noghanibehambari H. (2021) The nexus between CO2 emissions, energy consumption, and economic growth in the US. Economic Analysis and Policy, 69, 182-194
Sedrakyan G. S., Varela-Candamio L. (2019) Wagner’s law vs. Keynes’ hypothesis in very different countries (Armenia and Spain). Journal of Policy Modeling, 41(4), 747-762
Selvanathan E. A., Selvanathan S., Jayasinghe M. S. (2021) Revisiting Wagner’s and Keynesian’s propositions and the relationship between sectoral government expenditure and economic growth. Economic Analysis and Policy. 71, 355-370
Shuaib I. M., Igbinosun F. E., Ahmed A. E. (2015) Impact of government agricultural expenditure on the growth of the Nigerian economy. Asian Journal of Agricultural Extension, Economics and Sociology, 23-33
Solow R. M. (1956) A contribution to the theory of economic growth. The quarterly journal of economics, 70(1), 65-94
Stoilova D. (2017) Tax structure and economic growth: Evidence from the European Union. Contaduría y administración, 62(3), 1041-1057
TanziV., Zee H. H. (1997) Fiscal policy and long-run growth. Staff Papers, 44(2), 179-209
Thabane K., Lebina S. (2016) Economic Growth and government spending: empirical evidence from Lesotho. African Journal of Economic Review, 5(1), 86-100
Tijani A. A., Oluwasola O., Baruwa O. I. (2015) Public sector expenditure in agriculture and economic growth in Nigeria: An empirical investigation. Agrekon, 54(2), 76-92
Tobin J. (1965) Money and economic growth. Econometrica: Journal of the Econometric Society, 671-684
Todaro M.P., Smith S.C. (2015) Economic Development, 12th Edition. New Jersey: Pearson Education, In.
Wang X., Xu Z., Qin Y., Skare M. (2021) Foreign direct investment and economic growth: a dynamic study of measurement approaches and results. Economic Research-Ekonomska Istraživanja, 1-24
Wani S. H. (2022) Trade Openness, Capital Formation, and Economic Growth: Empirical Evidence from India. Eurasian Journal of Business and Economics, 15(29), 35-49
Weiss M., Clara (2016) Unlocking domestic investment for industrial development, Department of Policy, Research and Statistics Working Paper 12/2016, Vienna: UNIDO
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Studia Universitatis Babeș-Bolyai Oeconomica
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
