Economic Growth and Public Spending on Selected Sectors in Tanzania

Abstract

This paper presents empirical analysis of the relationship between sectoral public expenditure and economic growth in Tanzania. It uses time series data spanning over the period from 1968 - 2011. In this paper real gross domestic product (GDP) is used as a proxy of economic growth. The investigation focuses on analysis of relationship between public expenditure on education, agriculture, transport and communication and the rest of the sectors (ROS) and economic growth. Augmented Dicker-Fuller, Phillips-Perron, Johansen co-integration test and vector error correction model are used to capture short and long-run dynamics of economic growth. Our result indicates that public expenditure plays no significant role in accelerating economic growth in Tanzania for the last 44 years. These finding may give some overview of policy implications to the Tanzania policymakers on optimizing the effects of government expenditure in economic growth.