Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa

Isubalew Daba Ayana; Wondaferahu Mulugeta Demissie; Atnafu Gebremeskel Sore

doi:doi:10.11648/j.eco.20251403.11

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Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa

Isubalew Daba Ayana^*

, Wondaferahu Mulugeta Demissie, Atnafu Gebremeskel Sore

Published in Economics (Volume 14, Issue 3)

Received: 5 July 2025 Accepted: 19 July 2025 Published: 11 August 2025

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Abstract

Motivated by empirical debates concerning the relationship between government expenditure and economic growth, this study examines the short and long-run effects of government expenditure on economic growth in 41 Sub-Saharan African countries from 2012-2022. The System GMM estimation technique was employed for the panel data obtained from World Development Indicators and the e-government Development Index. The safety of the data was duly checked by employing the LLC and IPS methods for unit root. The result of the study asserts that government expenditure adversely affects the economic growth of SSA in both the short and long run. The finding from the system GMM reveals that a one percentage change in government final consumption expenditure is associated with a 0.0342 percent decline in GDP per capita growth in the short run, while it leads to a 0.0045 decline in the GDP per capita growth of SSA countries, all other things kept constant. This shows that the negative effect of government expenditure in the long run is lower than its adverse effect in the short run. Further, unlike the short run, the adverse effect of the government expenditure is found to be insignificant in the long run. The policy implication is that SSA countries should carefully monitor their government spending in both the short and long run. Further, fiscal authorities of SSA countries are advised to direct the government expenditure to profitable projects. Finally, the faster GDP per capita growth in SSA countries demands a sharp focus on development sectors.

Published in	Economics (Volume 14, Issue 3)
DOI	10.11648/j.eco.20251403.11
Page(s)	53-65
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2025. Published by Science Publishing Group

Keywords

Government Expenditure, Economic Growth, Sub-Saharan Africa, System GMM

References

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Ayana, I. D., Demissie, W. M., Sore, A. G. (2025). Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa. Economics, 14(3), 53-65. https://doi.org/10.11648/j.eco.20251403.11

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Ayana, I. D.; Demissie, W. M.; Sore, A. G. Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa. Economics. 2025, 14(3), 53-65. doi: 10.11648/j.eco.20251403.11

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Ayana ID, Demissie WM, Sore AG. Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa. Economics. 2025;14(3):53-65. doi: 10.11648/j.eco.20251403.11

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@article{10.11648/j.eco.20251403.11,
  author = {Isubalew Daba Ayana and Wondaferahu Mulugeta Demissie and Atnafu Gebremeskel Sore},
  title = {Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa
},
  journal = {Economics},
  volume = {14},
  number = {3},
  pages = {53-65},
  doi = {10.11648/j.eco.20251403.11},
  url = {https://doi.org/10.11648/j.eco.20251403.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20251403.11},
  abstract = {Motivated by empirical debates concerning the relationship between government expenditure and economic growth, this study examines the short and long-run effects of government expenditure on economic growth in 41 Sub-Saharan African countries from 2012-2022. The System GMM estimation technique was employed for the panel data obtained from World Development Indicators and the e-government Development Index. The safety of the data was duly checked by employing the LLC and IPS methods for unit root. The result of the study asserts that government expenditure adversely affects the economic growth of SSA in both the short and long run. The finding from the system GMM reveals that a one percentage change in government final consumption expenditure is associated with a 0.0342 percent decline in GDP per capita growth in the short run, while it leads to a 0.0045 decline in the GDP per capita growth of SSA countries, all other things kept constant. This shows that the negative effect of government expenditure in the long run is lower than its adverse effect in the short run. Further, unlike the short run, the adverse effect of the government expenditure is found to be insignificant in the long run. The policy implication is that SSA countries should carefully monitor their government spending in both the short and long run. Further, fiscal authorities of SSA countries are advised to direct the government expenditure to profitable projects. Finally, the faster GDP per capita growth in SSA countries demands a sharp focus on development sectors.},
 year = {2025}
}

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TY  - JOUR
T1  - Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa

AU  - Isubalew Daba Ayana
AU  - Wondaferahu Mulugeta Demissie
AU  - Atnafu Gebremeskel Sore
Y1  - 2025/08/11
PY  - 2025
N1  - https://doi.org/10.11648/j.eco.20251403.11
DO  - 10.11648/j.eco.20251403.11
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 53
EP  - 65
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20251403.11
AB  - Motivated by empirical debates concerning the relationship between government expenditure and economic growth, this study examines the short and long-run effects of government expenditure on economic growth in 41 Sub-Saharan African countries from 2012-2022. The System GMM estimation technique was employed for the panel data obtained from World Development Indicators and the e-government Development Index. The safety of the data was duly checked by employing the LLC and IPS methods for unit root. The result of the study asserts that government expenditure adversely affects the economic growth of SSA in both the short and long run. The finding from the system GMM reveals that a one percentage change in government final consumption expenditure is associated with a 0.0342 percent decline in GDP per capita growth in the short run, while it leads to a 0.0045 decline in the GDP per capita growth of SSA countries, all other things kept constant. This shows that the negative effect of government expenditure in the long run is lower than its adverse effect in the short run. Further, unlike the short run, the adverse effect of the government expenditure is found to be insignificant in the long run. The policy implication is that SSA countries should carefully monitor their government spending in both the short and long run. Further, fiscal authorities of SSA countries are advised to direct the government expenditure to profitable projects. Finally, the faster GDP per capita growth in SSA countries demands a sharp focus on development sectors.
VL  - 14
IS  - 3
ER  -

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Isubalew Daba Ayana

Department of Economics, Wollega University, Nekemte, Ethiopia

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http://orcid.org/0009-0007-0109-1695
Wondaferahu Mulugeta Demissie

Departments of Economics, Ethiopian Civil Service University, Addis Ababa, Ethiopia

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Atnafu Gebremeskel Sore

Departments of Economics, Addis Ababa University, Addis Ababa, Ethiopia

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Ayana, I. D., Demissie, W. M., Sore, A. G. (2025). Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa. Economics, 14(3), 53-65. https://doi.org/10.11648/j.eco.20251403.11

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Ayana, I. D.; Demissie, W. M.; Sore, A. G. Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa. Economics. 2025, 14(3), 53-65. doi: 10.11648/j.eco.20251403.11

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AMA Style

Ayana ID, Demissie WM, Sore AG. Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa. Economics. 2025;14(3):53-65. doi: 10.11648/j.eco.20251403.11

Copy | Download

@article{10.11648/j.eco.20251403.11,
  author = {Isubalew Daba Ayana and Wondaferahu Mulugeta Demissie and Atnafu Gebremeskel Sore},
  title = {Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa
},
  journal = {Economics},
  volume = {14},
  number = {3},
  pages = {53-65},
  doi = {10.11648/j.eco.20251403.11},
  url = {https://doi.org/10.11648/j.eco.20251403.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20251403.11},
  abstract = {Motivated by empirical debates concerning the relationship between government expenditure and economic growth, this study examines the short and long-run effects of government expenditure on economic growth in 41 Sub-Saharan African countries from 2012-2022. The System GMM estimation technique was employed for the panel data obtained from World Development Indicators and the e-government Development Index. The safety of the data was duly checked by employing the LLC and IPS methods for unit root. The result of the study asserts that government expenditure adversely affects the economic growth of SSA in both the short and long run. The finding from the system GMM reveals that a one percentage change in government final consumption expenditure is associated with a 0.0342 percent decline in GDP per capita growth in the short run, while it leads to a 0.0045 decline in the GDP per capita growth of SSA countries, all other things kept constant. This shows that the negative effect of government expenditure in the long run is lower than its adverse effect in the short run. Further, unlike the short run, the adverse effect of the government expenditure is found to be insignificant in the long run. The policy implication is that SSA countries should carefully monitor their government spending in both the short and long run. Further, fiscal authorities of SSA countries are advised to direct the government expenditure to profitable projects. Finally, the faster GDP per capita growth in SSA countries demands a sharp focus on development sectors.},
 year = {2025}
}

Copy | Download

TY  - JOUR
T1  - Government Spending and Economic Growth Nexus: A Contemporary Evidence in Sub-Saharan Africa

AU  - Isubalew Daba Ayana
AU  - Wondaferahu Mulugeta Demissie
AU  - Atnafu Gebremeskel Sore
Y1  - 2025/08/11
PY  - 2025
N1  - https://doi.org/10.11648/j.eco.20251403.11
DO  - 10.11648/j.eco.20251403.11
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 53
EP  - 65
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20251403.11
AB  - Motivated by empirical debates concerning the relationship between government expenditure and economic growth, this study examines the short and long-run effects of government expenditure on economic growth in 41 Sub-Saharan African countries from 2012-2022. The System GMM estimation technique was employed for the panel data obtained from World Development Indicators and the e-government Development Index. The safety of the data was duly checked by employing the LLC and IPS methods for unit root. The result of the study asserts that government expenditure adversely affects the economic growth of SSA in both the short and long run. The finding from the system GMM reveals that a one percentage change in government final consumption expenditure is associated with a 0.0342 percent decline in GDP per capita growth in the short run, while it leads to a 0.0045 decline in the GDP per capita growth of SSA countries, all other things kept constant. This shows that the negative effect of government expenditure in the long run is lower than its adverse effect in the short run. Further, unlike the short run, the adverse effect of the government expenditure is found to be insignificant in the long run. The policy implication is that SSA countries should carefully monitor their government spending in both the short and long run. Further, fiscal authorities of SSA countries are advised to direct the government expenditure to profitable projects. Finally, the faster GDP per capita growth in SSA countries demands a sharp focus on development sectors.
VL  - 14
IS  - 3
ER  -

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