Socio-economic determinants of public expenditure in Africa: assessing the influence of population age structure

Abstract

PurposeAfrica's population is the second largest and fastest growing in the world after Asia, and this puts African governments under great stress in terms of increased public expenditure and is faced with a low revenue generation. Hence, the need for this study. The purpose of this paper is to examine the socio-economic determinants of public expenditure in Africa by assessing the influence of population age structure using a sample of the top ten most populous countries in Africa covering period of 1989 to 2018.Design/methodology/approachThe study employed panel fully modified ordinary least square (OLS) in estimating the relevant relationship between the variables in the model. The dynamic ordinary least square (DOLS) model was also used to check the robustness of the fully modified ordinary least square (FMOLS) results.FindingsThe findings revealed that the major population age structure that influences the growth of public expenditure in Africa are population ages (0–14) and population ages (15–64), but the former poses a stronger significant influence than the latter while population ages (65 and above) has a negative and insignificant influence. Also, in terms of other socio-economic factors, self-employment has a reducing and significant influence on public expenditure. GDP per capita has a negative and insignificant influence while foreign aid and unemployment rate has an increasing influence. Finally, inflation rate and control of corruption (CC) has a negative relationship with public expenditure.Social implicationsThe study argues that an increase in the young and working population will put enormous pressure on the government in the provision of more jobs and other public infrastructures such as health care and education. In the context of African economy with a low revenue generation, public expenditure will be low and the desperately poor masses will be denied of these public infrastructures.Originality/valueSeveral studies (Jibir and Aluthge, 2019; Tayeh and Mustafa, 2011; Okafor and Eiya, 2011; Obeng and Sakyi, 2017; Ofori-Abebrese, 2012) have investigated the determinants of public expenditure using total population as a variable. However, this study is unique as it focused on the influence of population age structure on public expenditure in Africa. Also, the study incorporated other socio-economic determinants of public expenditure such as self-employment, standard of living, inflation rate, unemployment rate, foreign aid and corruption in its analytical model. To the best of our knowledge, some of these variables have not been employed in previous studies.

Panel data comparative analysis on the influence of population age structure on the size of government expenditure in Africa and Asia

“…Also, as more jobs are created, government recurrent expenditure in the form of payment of wages and salaries will also increase. Thus, both capital and recurrent expenditure increase simultaneously as the population grows over time (Azolibe et al , 2020). In most developing countries in Africa and Asia such as South Africa, Nigeria, Kenya, Uganda, China, India, Bangladesh and Pakistan with a high population growth rate, the government in the quest to increase its expenditure on basic amenities and social services forms partnership arrangement with the private sectors (both domestic and foreign) through what is popularly known as public–private partnership (PPP) and the government of developed nations in the provision of healthcare, education, housing, power supply, transport and employment for their teeming population.…”

Human Capital Development and Unemployment in Uganda: The Keynesian Theory of Unemployment in Perspective

“…The government wants to improve human capital development by investing more in education so that people have the information and skills needed to find work and make a significant economic contribution (Lawanson & Umar, 2020). The correlation between education expenditure and unemployment is evident in various aspects of the education system, including infrastructure development, teacher training, curriculum enhancement, and vocational education initiatives (Azolibe et al, 2020). Moreover, Infrastructure development stands as a cornerstone of education expenditure in Uganda, with investments directed towards expanding and improving educational facilities nationwide (Robert et al, 2021).…”

Government expenditure impacts on financial development: Do population age structures moderations matter?

“…This inevitably forces the government to create more job avenues which create more demands for wages and salaries, provision of old-age social services such as health care and monthly or quarterly payments of pensions for 65+ aged population. This way, recurrent and capital expenditures increase simultaneously as the population grows over years (Azolibe et al ., 2020).…”

“…From an empirical point of view, study contexts seem to dictate the nature of the research outcomes. Recent studies done in Africa signal positive results for the effect of population structure on government spending (Azolibe, 2022; Azolibe et al ., 2020). Based on age structure, 0–14 and 15–64 in African countries, population has a positive impact on government spending, while in Asian countries they found age structures 15–64 and 65+ to positively affect government spending.…”