Analysis of the impact of government expenditure on economic growth in Botswana

Abstract

This study analysed the impact of government expenditure on economic growth in Botswana for the period 1981-2014. It focuses on sectoral expenditures on agriculture, education, health, and electricity and water supply using annual time series data from Bank of Botswana and World Bank databases. The study relies on the Autoregressive Distributed Lag (ARDL) bounds test for the empirical analysis. Results suggest expenditures on agriculture have a positive and significant impact on economic growth. This relationship is suggested in both the short run and long run models. The relationship is significant at 5 percent in the short run model and 1 percent in the long run model. Health expenditure has a positive and statistically significant impact at 1 percent level on economic growth in the long run model. Expenditures on water and electricity supply have a negative impact on economic growth at the 1 percent significance level. This suggests poor quality in spending on the sector. In terms of policy implications, the results of the study suggest the allocation of government resources towards the agriculture and health sectors should be favoured in order to enhance economic growth.