Effect of Government Infrastructure Expenditure on Poverty in the East African Community

Abstract

The East African Community (EAC) level of economic integration is among the most advanced Regional Economic Communities (RECs) in Africa. With advancement in integration, efforts are being made by the member countries to have collective decision making on fiscal policies with the view of addressing poverty situation among other economic factors. However, while economic theory indicates that increased government expenditure leads to reduced poverty, empirical literature pits conflicting results. The difference in opinions poses lack of predictability of public finance decision making as to whether a perceptible relationship exists between public expenditure on infrastructure and poverty. This study thus, assessed the effect of government expenditure on infrastructure and poverty in EAC. Poverty was measured by private consumption per capita. The study was anchored on the Ferroni and Kaburi resource allocation framework. Correlational research design was adopted in the study. The analysis span between 2007 and 2018. The study used data drawn from five countries, namely, Burundi, Kenya, Rwanda, Tanzania and Uganda. Panel data analysis was employed to interrogate the study topic. The Random Effects Model was used to estimate the relationship after converting the log transformed data to stationary series. The results indicated that Government expenditure on infrastructure was significant in lowering poverty (β2=0.1577; p=0.0000). Thus, the need to enhance allocation and expenditure on infrastructure to arrest poverty. The findings may be beneficial to policymakers, strategists, government and advocacy groups

The East African Community (EAC) level of economic integration is among the most advanced Regional Economic Communities (RECs) in Africa. With advancement in integration, efforts are being made by the member countries to have collective decision making on fiscal policies with the view of addressing poverty situation among other economic factors. However, while economic theory indicates that increased government expenditure leads to reduced poverty, empirical literature pits conflicting results. The difference in opinions poses lack of predictability of public finance decision making as to whether a perceptible relationship exists between public expenditure on infrastructure and poverty. This study thus, assessed the effect of government expenditure on infrastructure and poverty in EAC. Poverty was measured by private consumption per capita. The study was anchored on the Ferroni and Kaburi resource allocation framework. Correlational research design was adopted in the study. The analysis span between 2007 and 2018. The study used data drawn from five countries, namely, Burundi, Kenya, Rwanda, Tanzania and Uganda. Panel data analysis was employed to interrogate the study topic. The Random Effects Model was used to estimate the relationship after converting the log transformed data to stationary series. The results indicated that Government expenditure on infrastructure was significant in lowering poverty (β2=0.1577; p=0.0000). Thus, the need to enhance allocation and expenditure on infrastructure to arrest poverty. The findings may be beneficial to policymakers, strategists, government and advocacy groups