Effect of County Government Expenditure on County Economic growth : The Case of Kenya

From past empirical works, the role of expenditure on economic growth appears to provide inconclusive results. Despite this uncertainty, public finance theory suggests that expenditure induce growth. In Kenya, economic growth has been fluctuating despite the devolved expenditure increasing over time. It is against this background that this study was carried out to investigate empirically the short-run and long-run effect of components of county spending on growth in Kenya using ARDL and ECM estimates for the period 2013 to 2017.The ARDL results revealed that spending on recurrent expenditure exerts a positive and significant effect on economic growth both in short-run and long-run hence confirming Keynesian theory in Kenya. However, capital expenditure was insignificant during the study period. From a recommendation standpoint, this study submits that the policymakers need to put in place policies that will improve budget allocation and execution so as to improve expenditure increase to capital infrastructure. This is necessary since counties lack infrastructures that help promote private capital accumulation and consequently county economic growth