An empirical analysis of disaggregated government expenditure and economic growth in South Africa

Abstract

The motivation for this study stems from the weak economic growth that the country has been experiencing lately, coupled with the concern over government spending in South Africa. Estimating only the effect of government spending on economic growth is not enough; the different components of government spending should also be investigated in order to observe their relationships with economic growth. Earlier studies in South Africa considered the effects of total government spending on economic growth. This is the first study to our knowledge that disaggregated government spending into government investment spending and government consumption spending. This study, therefore, examines the effects of government investment expenditure and government consumption expenditure along with groups of control variables on economic growth in South Africa, using the autoregressive distributed lag (ARDL) technique. Annual data spanning the period 1976 to 2015 was employed. The results show that the disaggregated government spending is positively related to economic growth both in the long run and the short run, during the period considered