Impact of Disaggregated Public Expenditure on Unemployment Rate of Selected African Countries: A Panel Dynamic Analysis Approach [PDAA]


Impact of Disaggregated Public Expenditure on Unemployment Rate of Selected African Countries: A Panel Dynamic Analysis Approach [PDAA]


Aphu Elvis Selase

College of Public Administration, Huazhong University of Science and Technology, Wuhan, Hubei, China 430074


American Journal of Public administration

The study demonstrated the impact of disaggregated public expenditure on unemployment rate in selected African countries with panel data spanning from 2000 to 2017. The data were majorly sourced from the World Bank Indicator. The study employed Generalized Method of Moments (GMM) techniques for empirical analysis. The findings of two-step system GMM showed that expenditure on infrastructure and education reduce unemployment rate, while expenditure on defense and health increase unemployment rate in the region. The short-run elasticity estimate showed that infrastructure and education expenditures reduce unemployment rate by 9% and 1.83%. A unit rise in defense and health expenditure increase unemployment rate by 5.2% and 84.5%. The long-run elasticity of infrastructure and education expenditure reduce unemployment rate by 3.8% and 7.89 %, while the long-run defense and health expenditure elasticity’s increase unemployment rate by 22.22% and 364.58% in the selected African countries. The policy implication is that, the positive relationship between expenditure on health and unemployment could be attributed to mismanagement of government funds due to corruption, while that of defense and unemployment could be high rate of insecurity and crimes in the region. Therefore, the study recommended among others a drastic measure to further improve the education sector through adequate investment in education that will help in skills, development and training.


Keywords: African Countries, Expenditure Rate, Health, Defense, Education, Infrastructure, Unemployment.


Free Full-text PDF


How to cite this article:
Aphu Elvis Selase. Impact of Disaggregated Public Expenditure on Unemployment Rate of Selected African Countries: A Panel Dynamic Analysis Approach [PDAA]. American Journal of Public administration, 2019,1:9.


References:

1. Abu, N., & Abdullahi, U. (2010). Government expenditure and economic growth in Nigeria: A disaggregated analysis. Business and Economics Journal, 4.
2. Abubakar, A.B. (2016). Dynamic Effects of Fiscal Policy on Output and Unemployment in Nigeria: An Econometric Investigation. CBN Journal of Applied Statistics 7(2): 101-122.
3. Adawo, A. M., Essien, E. B. & Ekpo, N. U. (2012). Is Nigeria’s Unemployment Problem Unsolvable?,Current Research Journal of Social Sciences, 4(6): 389-395
4. Anthanasios O. T. (2013). The Unemployment Effects of Fiscal Policy: Recent Evidence from Greece. Iza Journal of European Labour Studies, 2:11
5. Araga, A. S. (2016). Impact of Government Expenditure on Employment Generation: Evidence from Nigeria. Extracted from academia.edu.
6. Arelleno, M. & Bover, O. (1995). Another Look at instrumental variable estimation of error component models. Journal of Econometrics. 68(1):29-51.
7. Arelleno, M., & Bond (1991). Some Tests of Specification for Panel Data:Monte Carlo Evidence and an Application to Employment. Review of Economic Studies Limited, 58(1): 277-297
8. Ayogueze, N. F. & Anidiobu, G.A. (2017). Assessment of Impact of Government Budget Deficits on Unemployment Rate in Nigeria, Journal of Economics and Finance, 8 (6): 18 – 26
9. Aziz, J. & Leruth, L. (1997). Cyclical Effects of Government Purchases, International Monetary Fund Working Paper WP/97/19, IMF
10. Battaglini, M. & Coate, S. (2011). Fiscal Policy and Unemployment,(No. w17562). National Bureau of economic research. Carmignani, F. (2014). Does Government Expenditure Multiply Output and Employment in Australia in Australia? Griffith Business School Discussion Paper in Economics, No. 2014-08, Griffith University, Brisbane
11. Bhatia, H. L. (2002). Public Finance, 25th Edition, Vikas Publishing House, PVT Ltd, India.
12. Blundell, R., Bond, S., & Windmeijer, F. (2001). Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator. In Nonstationary panels, panel cointegration, and dynamic panels (pp. 53-91). Emerald Group Publishing Limited.Blundell R, & Bond S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1):115-143.
13. Carmignani, F. (2014). Does Government Expenditure Multiply Output and Employment in Australia? (No. economics: 201408).
14. Dewett, K. K. & Navalur, M.H. (2012). Modern economic theory. New Delhi: S. Chand & company LTD.
15. Egbulonu, K. G., & Amadi, K.W. (2016).Effect Of Fiscal Policy on Unemployment in the Nigerian Economy. International Journal of Innovative Finance and Economics Research, 4(3), 1-7
16. Emeka E. E. (2018)An Empirical Analysis of the Budget Deficit and Unemployment Nexus in Nigeria. International Journal of Multidisciplinary Research and Publications, 1(3): 3-11.
17. Estache, A., Ianchovichina, E., Bacon, R. and Salamon, I. (2013). Infrastructure and Employment Creation in the Middle East and North Africa, World Bank Report on Direction in Development of Infrastructure. Retrieved on May 20, 2016 from https://openknowledge.worldbank.org/bitstream/handle/10986/12237/NonAsciiFileName0.pdf?se
18. Fagbohun, A.(2017). The Economic Performance of Budget Deficit in Nigeria, Research Journal of Finance and Accounting, 8 (8), 128 – 135
19. Faramarzi, A., Avazalipour, M. S., Khaleghi, F. & Hakimipour, N. (2014). Long Run Impact of Government Expenditure and Tax on Liquidity and Employment in Iran Economy, International Journal of Research and Reviews in Applied Sciences, 18 (1): 65-72.
20. Holden, S., & V. Sparrman (2013). Do Government Purchases Affect Unemployment? http://folk.uio.no/sholden/wp/fiscal-U.pdf (Accessed August 28, 2013).
21. Holtz-Eakin, D. Neway, W. & Rosen, H. S. (1988). Estimating Vector Autoregression with Panel data. Econometrica:Journal of the Econometric Society,1371-1395.
22. Jhingan, M. L. (2008): Monetary Economics, Sixth Edition, Delhi: Vrinda Publications Ltd.
23. Kairo, C. I., M. J., Okeke, A. A. & Dura, C. (2017).Government Expenditure and Human Capital Development in Nigeria. International Journal of Advanced Studies in Economics and Public Sector Management, 5(1): 143-158.
24. Kasau, M.I., Rahmatiah, H.J., Madris, H., & Suhab, S. (2015). Effect of Government Spending on Employment through Investment and its impact on the Eastern and Western Indonesia. International Journal of Research in Social Sciences, 5(5): 55-64.
25. Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London and New York, Macmillan.
26. Mahmood, T., Ali, A., Akhtar, N., Iqbal, M., Qamar, S., Nazir, H.Z., Abba, N., & Sana, I (2014). Determinants of Unemployment in Pakistan: A Statistical Study. International Journal of Asian Social Science, 4(12): 1163-1175
27. Monacelli, T. & Perotti, R. (2010). Fiscal policy, the real exchange rate and traded goods. The Economic Journal, 120(544): 437- 461.
28. Murwirapachena, G., Choga, I., Maredza, A., & Mavetera, N. (2013). Fiscal Policy and Unemployment in South Africa: 1980–2010. Mediterranean Journal of Social Sciences, 4(6), 579.
29. Nwosa, P.I, (2014). Government Expenditure, Unemployment and Poverty Rates in Nigeria. Journal research in national development, 12 (1): 77-84
30. Okoye, L. U., Evbuomwan, G.O., Modebe, N.J., & Ezeji, F. N. (2016). Macroeconomic Performance and Government Fiscal Deficits – Evidence from Nigeria. Nigerian Journal of Management Technology & Development, 7(2), 1-8.
31. Onodugo,V.A., Obi, K.O., Anowor, O.F., Nwonye, N.G., & Ofoegbu, G.N. (2017).Does Public Spending Affect Unemployment in an Emerging Market? Risk governance & control: financial markets and institutions, 7(1): 32-40.
32. Onuoha, F.C, & Agbede, M.O. (2019). Impact of Disaggregated Public Expenditure on Economic Growth of Selected African Countries: A Panel Vecm. International Journal of Development and Economic Sustainability, 7(3): 64-79
33. Peter, G. A. (2015).Effects of public expenditure on selected macroeconomic variables in Nigeria; 1986-2012. An unpublished thesis submitted to Department of Economics, Faculty of Social Sciences, Ahmadu Bello University, Zaria.
34. Roodman, D. (2009). How to do xtabond2: An Introduction to Difference and System GMM in Stata. The Stata Journal, 9 (1): 86-136
35. Samira, R. & Khalil .S. (2015). The Effect of Government Expenditure on Unemployment Rate for Iran. International Journal of review in life science, 5(7): 109-116
36. Sangkuhl, E. (2015). How the Macroeconomic Theories of Keynes influenced the Development of Government Economic Finance Policy after the Great Depression of the 1930’s: Using Australia as the Example. Athens Journal of Law, 1(1): 32-52.
37. Tagkalakis, A.O (2013). The Unemployment Effects of Fiscal Policy: Recent Evidence from Greece.IZA. Journal of European Labor Studies, 2(11).
38. Ubi, P & Inyang, J. (2018). Fiscal Deficit and Nigeria’s Economic Development. International Journal of Economics, Commerce and Management, 6 (5), 137 – 150
39. Umut, U. (2015). The Unemployment Effects of Fiscal Policy in Netherland. The Journal of faculty of economics and administrative sciences, 20(1), 143-153.
40. World Bank, (1998). Report on Unemployment. Available (on line) at: http://www.worldbank/unemployment/report.org.
41. Wosowei, E. (2013). Fiscal deficits and macroeconomic aggregates in Nigeria. Kuwait Chapter of Arabian Journal of Business and Management Review, 33(858), 1-11.