Assessment of the Effect of Government Expenditure on Economic Growth in Tanzania.

Mboya, Victor M. (2025) Assessment of the Effect of Government Expenditure on Economic Growth in Tanzania. Masters thesis, The Open University of Tanzania.

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Abstract

Using data from 1970 to 2022, the dissertation examines how Tanzania's government spending affects economic expansion. The research utilizes a time series model, incorporating independent variables; consumption expenditure, investment expenditure, and human capital expenditure, with GDP as the dependent variable. The study employs descriptive statistics and regression analysis to elucidate relationships between government spending and economic growth. Notably, the Autoregressive Distributed Lag (ARDL) model is employed to accommodate both stationary and non-stationary variables, offering robustness and flexibility in analysing mixed-order integration time series data. The findings reveal nuanced relationships between government expenditure components and economic growth. Investment expenditure exhibits a significant positive long-run effect on GDP, underscoring the importance of strategic investment planning in key sectors to foster sustainable economic development. In contrast, consumption expenditure demonstrates both short run and long run positive effects on GDP, highlighting the significance of consumer spending in driving economic expansion, especially during economic downturns. Human capital expenditure, while showing negative short run effects, exhibits positive long run effects on GDP. Based on the research findings, policy recommendations, include prioritizing strategic investments in infrastructure and key sectors, promoting sustained government spending in public services, and implementing policies to enhance human capital investments. Keywords: Government Expenditure, Economic Growth, Investment Expenditure, Consumption Expenditure, Human Capital Expenditure.

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