Implications of Non –productive and Productive Government Expenditure on Output and Employment: Evidence From Nigeria

Abiola John Asaleye, Rotdelmwa Filibus Maimako, Henry Inegbedion, Adedoyin Isola Lawal, Charity O. Aremu


Nigerian government expenditure has been on an increasing trend over the years, and its contribution to sustainable economic development; promoting long-term output and employment has generated controversial issues in the literature. Against this background, this study analyses the impact of both productive and non-productive government expenditure on output and employment in Nigeria using the Vector Error Correction Model, The long-run equations for output and employment are established. The joint short and long-run causality was also investigated. The study shows a contrary result to theoretical predictions; Nigeria's long-run growth is not promoting by productive government expenditure. Furthermore, there is joint short and long-run causality between employment and government expenditure channels. Evidence from the output equation indicates no joint long and short-run causality. The implication of this result shows that government expenditure either productive or non-productive, has not improved the economy, although there is an increase in employment generation through the non-productive channel, which has not promoted broad-based growth. For the Nigerian government to improve the situation, the study recommends a critical assessment of public expenditure through the cost-benefit approach.

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Research in World Economy
ISSN 1923-3981(Print)ISSN 1923-399X(Online)


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