The impact of aggregate government expenditure on growth in OECD and SSA countries

Abstract

This study identified the extent to which aggregate government expenditure affect economic growth in OECD and SSA. The study used static and dynamic model which involved the use of fixed effect and pooled OLS with regards to the static model and SYS-GMM to achieve the set objective. The SYS-GMM showed that government expenditure had a negative significant impact on growth in OECD countries but a positive significant impact in SSA countries. The results for combining all the countries used for the study showed that, government expenditure had a negative impact on growth of real GDP per capita for all countries but was significant for the pooled OLS results. In a situation where government expenditure per worker is growth enhancing, it is recommended for government to implement expansionary fiscal policies through infrastructure development like roads, good educational system telecommunication networks etc to help enhance growth.