Impact of Public Expenditure on Economic Growth in WAEMU Countries: A Re-Examination

Abstract

Besides fulfilling their state sovereignty responsibilities, governments are increasingly participating in economic growth through the production of goods and services. This is why it is possible to measure a government’s weight in the economy by estimating the share of its expenditure in the gross domestic product (GDP). However, the issue of the effectiveness of government expenditure requires accurate knowledge of economic repercussions, as these have, for a long time, been considered to be destructive to the wealth that usually derives from taxes and borrowing. The aim of this study is thus to reexamine the structure of government spending in the member states of the West African Economic and Monetary Union (WAEMU), and to determine their relative influence on economic growth. The issue of the impact of public expenditure on the level of economic performance is not new. Numerous studies have explored this area of economic analysis. However, the relationship between the specificities of public expenditure and the resultant economic growth is an aspect of this analysis that calls for further research. The distinction between productive and non-productive public expenditure is the cause of the differing levels of economic growth that can be observed in the WAEMU area. Statements of non-productive public expenditure vary significantly from one country to another, depending on each country’s specificities and priorities of the moment. The study attempted to demonstrate that public expenditure in the WAEMU area tends to improve economic growth at a low but still significant level. A comparative analysis of the results shows that public expenditure in countries with characteristics similar to those of the WAEMU countries accounts for economic growth in a more significant way than in the case of other countries, mostly those in the Sahel region. The analysis also shows that too much intervention in the economy from the government increases private sector mistrust, leads to opportunistic behaviour and reduces the marginal efficiency of capital. Finally, the results of this study show that bad governance and the deterioration of the political risk index considerably weaken the economic growth in the WAEMU region.