Public Expenditure and Economic Growth in Togo
African Economic Research consortium
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.
Public consumption , , public investment,