The impact of government expenditure on pro poor sectors in reducing poverty: A case of Kibaha District

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Mzumbe University
This study examined the impact of government expenditure on pro poor sectors in reducing poverty in Kibaha district for the period of 2000 – 2009. The tool of analysis used is error correction model and pair wise granger causality to examine the impact of government expenditure on pro poor sectors for economic growth and poverty reduction. Tanzania has been characterized by increased public expenditure on pro poor sectors yet, it is experiencing an economic activity and pro poor growth been shrinking. For example, inflation has fallen from 30% in 1995 to 4.4% in 2004 and GDP grew at 5.2% in 2004, up from 2.6% in 1995. Despite these achievements, the decline in poverty has been only 3% during the 1990s (from 39 to 36%). The main objective of this study is to analysis the impact of government expenditure on pro-poor sectors in reducing poverty in Kibaha district. Pro poor sectors mentioned in this study are agriculture, health, education and roads. This study carried out statistical examinations to ensure the data was valid and reliable. Therefore, data diagnostics (stationery and unusual data) and good-fit model specification test (time series properties, normality test, unit root test, autocorrelation test, and cointegration test) were established. The study indicated that cointegration exist only when Per Capital Income (PCI) act as dependent variable. A long run relationship exists among PCI, road, health, education and agriculture expenditure in Kibaha district. The result for causality shows that government health expenditure granger causes per capital income and the causality runs from health expenditure to per capital income. Moreover, the result shows that on average, government expenditure on education have a positive significant effect on per capita income in Kibaha district. Others, government expenditure on agriculture and roads have positive relationship on per capita income and insignificant. Coefficient of health government expenditure has negative insignificant relationship on per capita income. The results emphasize the importance of government prioritization on its expenditure and spend. The implications of study are to improve investment to the pro poor sectors. In the course of implementing the development of pro poor sectors and other poverty reduction policies and strategies, people need to be trained for skills necessary to cater for the changing poverty and economic environment. It is recognized that, the success of poverty reduction policy depends on among others, well-developed human resources base.
A dissertation submitted to Mzumbe University as a partial fulfillment of the requirement for the award of Master’s of Science in Economics (Msc. Eco) of Mzumbe University.
Poverty, Kibaha District, Government Expenditure, Public Expenditure