article · The Scientific World JOURNAL
An analysis of Ethiopian time series data from 1980 to 2018 evaluates the short- and long-term relationships between public spending and economic growth using cointegration tests and vector error correction models. The findings reveal that government expenditure on both education and health produces positive and significant impacts on economic growth across both timeframes. Conversely, agricultural expenditure negatively affects economic growth over the long term, with considerable negative impacts observed in the short term. Public investment spending demonstrates a substantial negative effect in the short run and an insignificant positive effect over the long run. Defence spending yields only negligible positive effects in both periods. Strategic spending prioritising the health and education sectors can enhance workforce participation and overall productivity to foster sustained national economic progress.
Understanding how national budgets influence broad economic growth helps governments allocate limited public resources efficiently. The findings show that investments in human capital, specifically through education and healthcare, consistently generate substantial economic gains. In contrast, sectoral expenditures such as agriculture and defence do not automatically guarantee positive economic performance, highlighting the need for carefully targeted public fiscal planning.
The abstract does not indicate an application pathway or a direct commercialisation angle, as the study focuses exclusively on national fiscal policy and macroeconomic growth analyses.
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This study's primary goal was to explain how Ethiopia's economic growth affected government spending. The time series data utilized in the study were gathered between 1980 and 2018. The time series data were subjected to the Johansen cointegration test and the vector error correction model (VECM) in order to evaluate the short- and long-term correlations between public spending and economic growth in Ethiopia. According to the study, both long- and short-term economic growths are positively and significantly impacted by government spending on education. Long-term economic growth is negatively impacted by government expenditure on agriculture, while short-term effects are negatively impacted and considerable. In the long run, investment spending has a positive but negligible impact on economic growth; however, in the short run, it has a negative but large effect. Defense spending by the government has a positive and negligible effect on economic growth over the short and long terms. Both in the short and long terms, spending on health has a favorable and considerable impact on economic growth. According to the study, government spending on the education sector would help to foster the conditions that could result in higher labor force participation rates and, consequently, higher rates of economic growth. Aiming to establish a healthy and productive society that promotes economic progress, policy should focus on complementary measures to scale-up initiatives in the health sector.
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DOI: 10.1155/2023/9305196
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