Public spending and sustainable economic development

Abstract

Purpose Despite the increase in public spending by Sub-Saharan African (SSA) Governments in a bid to foster the growth of human capital and sustainable development, they continue to experience a very slow rate of progress. This study aims to investigate the impacts of public spending on sustainable economic development in SSA. Design/methodology/approach The study adopts the system generalized method of moments to account for cross-sectional dependence and endogeneity for 38 SSA countries from 1996 to 2019. Findings The findings indicate that public spending inhibits sustainable economic development while human capital enhances sustainable economic development in SSA. Furthermore, the study equally reveals that the development-inhibiting role of public spending is modulated through human capital and governance quality. Public spending interacts with human capital and governance quality to produce negative net effects and positive synergy effects, respectively. Originality/value Based on these findings, the study suggests that governments in SSA countries should discourage heavy dependence on public spending. Policies that provide a framework for financial incentives in the domain of health and education should be encouraged to increase investment in human capital.