Abstract: The Kenyan government has been spending massive amount of funds to the various Ministries in order to achieve economic development. The education, health, infrastructure and agriculture sectors have been receiving the largest amount of funds. Despite the increased government spending, there are conflicting results on the effects of government spending on economic growth. This paper presents a critical analysis on the effects of infrastructure capital expenditure on economic growth in Kenya. The specific objective of the study was to establishing the effects of public capital expenditure on infrastructure on economic growth in Kenya. The study adopted a causal relationship approach and relied on secondary data from the Ministry of National Treasury and Kenya Bureau of Statistics with the data straddling from 1980 to 2011 for all variables. It was hypothesized that increased expenditure will not increase GDP. The study employed Johansen cointegration test and the Error Correction Method (ECM) in the empirical analysis to evaluate the relationship among the variables. The data was subjected to stationarity test. The short run and long run relationship with three cointegrating equations revealed that the coefficient of expenditure on infrastructure was statistically significant and positively related to GDP at 5% level of significance. The government should therefore is justfied increase the percentage capital amount allocated into this sector. It was also noted that the government programs like Lamu Port and New Transport Corridor Development to Southern Sudan and Ethiopia (LAPSSET) to foster increased investment in infrastructure and hasten delivery of goods and services is recommended.
Keywords: Capital Expenditure, Economic Growth and Economic Development.
Title: The Relation between Capital Infrastructure Spending and Economic Growth
Author: MATUNDURA G. ERICKSON
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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