Acta Universitatis Danubius. Œconomica, Vol 16, No 1 (2020)

Abstract

Abstract

The study investigated into the effect of government recurrent expenditure on economic growth, with emphasis on recurrent spending on social and community services, and transfers. In a modern economy, government perform two functions; economic and non-economic. Studies have shown that developed countries focus more on transfers and subsidies, while developing economies pay more attention on social and community services. For the Nigerian state, government performed these functions religiously, and available statistics showed that government spend more on recurrent goods and services, specifically on transfers, than capital goods and services and this has implication on growth. The study adopted Vector Error Correction Model technique. Other preliminary tests were conducted. From the empirical result, it was evident that social and community services are growth drivers of the Nigerian state. It was also observed that income channeled into transfers significantly boosted growth. The implication of this finding is that government efforts on improving the lives of its citizens yielded growth. It was recommended that government should make effort to also allot funds to capital expenditure in such a way that there would be no much significant difference between capital and recurrent spending as this would improve on the growth rate of the economy.

JEL Classification: H51, H52, H53