Impact of Public Expenditure on Economic Growth in WAEMU Countries: A Re-Examination
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Date
2017-04-04
Authors
Ouattara, Wautabouna
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research consortium
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.