The Impact Of Public Expenditure Effects On Poverty Reduction In Kenya

Abstract

The plan to combat poverty in Kenya was initiated right at independence with the adoption of the Sessional paper number 10 of 1965. Since then, there has been mushrooming of anti-poverty measures that have led to huge government expenditures. Half a century later, at least a third of the population is still entrenched in poverty measured at a threshold of $ 1.90 per day with majority of the poor living in the rural areas. This study is therefore an exploration on the impact of public expenditure effects on poverty reduction using time-series data from 1997-2019. Specifically, it determined the impact of economic growth, employment creation and effects of economic stability on poverty reduction. The study used OLS as the estimation method. Data on variables was gotten from databases in Kenya National Bureau of Statistics. It was transformed into logarithm form and then tested for stationarity using Augmented Dickey Fuller Test. Results of the ADF tests showed that the variables were integrated of different orders. Consequently, an autoregressive distributed lag (ARDL) modelling was adopted. Testing for cointegration using bounds test led to estimation of ARDL and EC models. It is established from the ARDL estimations that, all the public expenditure effects have positive impact on poverty reduction. However, only economic growth contributes to poverty reduction significantly. The analysis of the Error Correction Model results revealed that employment creation has varying short-run and long-run effects on the economic growth.