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The Impact Of Government Expenditure On Economic Growth In Nigeria (1980-2010)
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1.2 STATEMENT OF THE PROBLEM.
Policy makers are divided as to whether
government expansion helps or hinders economic growth. Advocates of
bigger government argue that government programs provide value “pubic
goods†such as education and infrastructure they also claim that
increases in government spending can boost economic growth by putting
money into people’s pocket. Proponents of smaller government have the
opposite view. They explain that government is too big and that higher
spending undermines economic growth by transferring additional from the
productive sector of the economy to government, which uses them less
efficiently. They also warn that expanding public expenditure leads to
complication in implementing pre-growth policies, Such as fundamental
tax reform and personal retirement accounts. This is because critics can
use the existence of budget deficit as a reason to opposite policies
that would strengthen the growth of the economy.
A major concern
about the Keynesian school of thought is that; if government
interference is an effective remedy for recession and has no side
effect, why do so many oppose the policy of budgetary expansion?
Firstly, a large public sector diminishes the business sector in
personal and the sources of investment. It may be maintained that in
time of recession, much of the workforce is not employed at all, and
therefore, employment in the public sector does not come at the expense
of the public sector.
Furthermore, in any growing economy, Government
spending can be curtailed, the government can revert to a lower level
of spending and personnel can be redirected to the business sector.
However, while budgetary expansion is easy in recession, cut-backs
during economic high are very difficult. No minister or director of a
public institution relinquishes authority and budget easily. The result
is an inflated and inefficient public sector even after the recession is
over, and also a lower rate of growth in the private sector than its
potential would indicate.
The relationship between public expenditure
and growth is important especially for developing countries (Nigeria
inclusive), most of which have experienced increasing level of public
expenditure over time. There is evidence that, unlike in the case if
developed countries, consumption is not negatively related with economic
growth. This study shall empirical investigate this relationship in the
case of Nigeria, with a view of explaining the reason behind the
observed causality between them.
1.3 OBJECTIVE OF THE STUDY
This
study intends to appraise the relationship between government
expenditure and economic growth over the years (1980-2010). The trend of
government expenditure will be assessed with reference to the Nigerian
economy, the specific objectives are: To examine the impact of
government expenditure on economic growth. To identify the trend of
public expenditure in Nigeria. To examine the constraint limiting the
effectiveness of public expenditure as an engine of economic growth. To
proffer solutions to the problems identified in factors limiting the
effectiveness of public expenditure.
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