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Assessing the determinants of government spending efficiency in Africa

Abiodun Adegboye () and Olawale Daniel Akinyele ()
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Abiodun Adegboye: Obafemi Awolowo University
Olawale Daniel Akinyele: Obafemi Awolowo University

Future Business Journal, 2022, vol. 8, issue 1, 1-17

Abstract: Abstract Government spending is one of the vital ways for the provision of public goods and services with a view of improving citizens' well-being. African countries have been identified by international bodies as naturally endowed with resources that serve as major financiers for many African governments yet, most countries in Africa are ranked low in human development. Though the nature of many governments is hinged on the quality of life, however, the reverse is the case for many African countries. Low development indicators as against huge African governments spending indicates low efficiency in spending. Hence, this study assesses the efficiency of government spending in Africa and examines the drivers of government spending efficiency. Adopts SFA to assess government spending efficiency while TFE model was used to examine the relationship between government spending efficiency and its drivers. Owing to macrodata adopted in the study, it accounts for the second-generation panel unit root and uses panel corrected standard error to correct for cross-sectional dependence among 40 African countries between 2000 and 2020. The frontier result revalidates government spending as an input factor to achieve growing human development in Africa. The result shows that the level of government spending efficiency depends on the size of the economy and other factors. Natural resources could be used to address the burgeon government spending efficiency when effectively utilized. The result shows that colonial legacy has a long-lasting impact on government spending efficiency. These results suggest the need for efficiency of government spending owing burgeon drivers available among African economies. We recommend the need to improve the efficiency of government spending in order to situate framework for Africa development. Effective resources utilization and a strong institutional framework are potential drivers of spending efficiency in African economies. The paper provides an empirical study on the relationship between natural resources, colonial legacy, and government spending efficiency through true fixed effect among African countries.

Keywords: Government spending; Efficiency; Human development; Natural resources (search for similar items in EconPapers)
JEL-codes: H21 H53 I30 Q28 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1186/s43093-022-00142-8

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