Public Finance

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Public Expenditure and Economic Growth in Togo
(African Economic Research consortium, 2017-02-21) Yovo, Koffi
This paper assesses the impact of the level and composition of public expenditure on growth in Togo. To this end, a neoclassical growth model was estimated using the Two-Stage Least-Squares method.The findings highlight that public expenditure during the period 1980–2009 had no significant positive effect on economic growth. However, public consumption had a negative impact and public investment a positive impact on growth. The maximum level at which public consumption becomes harmful to economic growth is estimated at 16%. Similarly, the minimum level of investment required to boost growth is estimated at 5.7%. All things being equal, a reallocation of public expenditure following the estimated optimal composition involves an additional increase in growth of 24%. Moreover, the study finds that increasing public expenditure involves a crowding-out effect, suggesting the need to review the way in which public expenditure can be financed more efficiently.