IDEAS home Printed from https://ideas.repec.org/a/sae/mareco/v6y2012i3p361-383.html
   My bibliography  Save this article

Democracy, Government Spending and Economic Growth: The Case of Ghana, 1960–2008

Author

Listed:
  • Daniel Sakyi

    (Daniel Sakyi is at the Department of Economics, KNUST, Kumasi, Ghana, Tel: 233-3220-60269, email: dsakyi2003@yahoo.com)

  • Samuel Adams

Abstract

Economic theory predicts a growth enhancing activities of various core functions of government. Nonetheless, government spending in non-democratic countries often goes beyond these core functions, namely into rent-seeking and non-productive activities. This paper employs the Autoregressive Distributed Lag bounds testing approach to cointegration to investigate the extent to which democracy and government spending have had an impact on economic growth in Ghana over the period 1960–2008. The empirical results obtained are encouraging, revealing support for the high effi ciency of government spending in democracies’ hypothesis. The paper demonstrates that democracy and government spending go hand in hand to have a positive impact on economic growth in Ghana in both the long and short run. The fi ndings and policy recommendations of the paper provide vital information relevant for developing countries involved in the democratisation process. JEL Classification : C22, H50, O40

Suggested Citation

  • Daniel Sakyi & Samuel Adams, 2012. "Democracy, Government Spending and Economic Growth: The Case of Ghana, 1960–2008," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(3), pages 361-383, August.
    • Handle: RePEc:sae:mareco:v:6:y:2012:i:3:p:361-383
    DOI: 10.1177/097380101200600303
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/097380101200600303
    Download Restriction: no
    File URL: https://libkey.io/10.1177/097380101200600303?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. A. F. Al-Faris, 2002. "Public expenditure and economic growth in the Gulf Cooperation Council countries," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1187-1193.
    2. Agell, Jonas & Lindh, Thomas & Ohlsson, Henry, 1997. "Growth and the public sector: A critical review essay," European Journal of Political Economy, Elsevier, vol. 13(1), pages 33-52, February.
    3. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2011. "Does democracy facilitate economic growth or does economic growth facilitate democracy? An empirical study of Sub-Saharan Africa," Economic Modelling, Elsevier, vol. 28(3), pages 900-910, May.
    4. Helliwell, John F., 1994. "Empirical Linkages Between Democracy and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 24(2), pages 225-248, April.
    5. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    6. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    7. Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
    8. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    9. Sylvain Boko, 2002. "Economic reform, democracy, and economic growth in Africa: An institutional approach," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(3), pages 264-264, August.
    10. Matthew A. Baum & David A. Lake, 2003. "The Political Economy of Growth: Democracy and Human Capital," American Journal of Political Science, John Wiley & Sons, vol. 47(2), pages 333-347, April.
    11. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    12. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    13. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    14. Dong-Hyeon Kim, 2011. "Trade, growth and income," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(5), pages 677-709, July.
    15. Daron Acemoglu, 2010. "When Does Labor Scarcity Encourage Innovation?," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1037-1078.
    16. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    17. FOSU, Augustin Kwasi, 2008. "Democracy and growth in Africa: Implications of increasing electoral competitiveness," Economics Letters, Elsevier, vol. 100(3), pages 442-444, September.
    18. Kjell Hausken & Christian W. Martin & Thomas Plümper, 2004. "Government Spending and Taxation in Democracies and Autocracies," Constitutional Political Economy, Springer, vol. 15(3), pages 239-259, September.
    19. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    20. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    21. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, September.
    22. Dong-Hyeon Kim & Shu-Chin Lin, 2009. "Trade and Growth at Different Stages of Economic Development," Journal of Development Studies, Taylor & Francis Journals, vol. 45(8), pages 1211-1224.
    23. Gries, Thomas & Kraft, Manfred & Meierrieks, Daniel, 2009. "Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 37(12), pages 1849-1860, December.
    24. Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2007. "Democracy, Technology, and Growth," NBER Working Papers 13180, National Bureau of Economic Research, Inc.
    25. Atrayee Ghosh Roy, 2009. "Evidence on economic growth and government size," Applied Economics, Taylor & Francis Journals, vol. 41(5), pages 607-614.
    26. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    27. Jian-Guang Shen, 2002. "Democracy and growth: An alternative empirical approach," Development and Comp Systems 0212002, University Library of Munich, Germany.
    28. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    29. World Bank, 2004. "World Development Indicators 2004," World Bank Publications - Books, The World Bank Group, number 13890.
    30. Aisen, Ari & Veiga, Francisco José, 2013. "How does political instability affect economic growth?," European Journal of Political Economy, Elsevier, vol. 29(C), pages 151-167.
    31. Daron Acemoglu & Simon Johnson & James Robinson, 2005. "The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth," American Economic Review, American Economic Association, vol. 95(3), pages 546-579, June.
    32. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100, Elsevier.
    33. Sylvain Boko, 2002. "Institutional Reform and Economic Growth in Africa," Journal of African Development, African Finance and Economic Association (AFEA), vol. 5(2), pages 48-70.
    34. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    35. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-560, August.
    36. Plumper, Thomas & Martin, Christian W, 2003. "Democracy, Government Spending, and Economic Growth: A Political-Economic Explanation of the Barro-Effect," Public Choice, Springer, vol. 117(1-2), pages 27-50, October.
    37. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    38. Ludovic Comeau, 2003. "Democracy and Growth: A Relationship Revisited," Eastern Economic Journal, Eastern Economic Association, vol. 29(1), pages 1-21, Winter.
    39. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    40. Pereira, Carlos & Teles, Vladimir Kuhl, 2009. "Political institutions as substitute for democracy: a political economy analysis of economic growth," Textos para discussão 196, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    41. David Stasavage, 2005. "Democracy and Education Spending in Africa," American Journal of Political Science, John Wiley & Sons, vol. 49(2), pages 343-358, April.
    42. Ruben Hernandez-Murillo & Christopher J. Martinek, 2008. "Which came first-democracy or growth?," The Regional Economist, Federal Reserve Bank of St. Louis, issue Apr, pages 4-6.
    43. repec:zbw:bofitp:2002_013 is not listed on IDEAS
    44. Minier, Jenny A, 1998. "Democracy and Growth: Alternative Approaches," Journal of Economic Growth, Springer, vol. 3(3), pages 241-266, September.
    45. James Gwartney & Randal Holcombe & Robert Lawson, 1998. "The Scope of Government and the Wealth of Nations," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 163-190, Fall.
    46. M. I. Ansari & D. V. Gordon & C. Akuamoah, 1997. "Keynes versus Wagner: public expenditure and national income for three African countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 543-550.
    47. Torsten Persson, 2005. "Forms of Democracy, Policy and Economic Development," NBER Working Papers 11171, National Bureau of Economic Research, Inc.
    48. Edward Nketiah-Amponsah, 2009. "Public spending and economic growth: evidence from Ghana (1970-2004)," Development Southern Africa, Taylor & Francis Journals, vol. 26(3), pages 477-497.
    49. Krieckhaus, Jonathan, 2006. "Democracy and Economic Growth: How Regional Context Influences Regime Effects," British Journal of Political Science, Cambridge University Press, vol. 36(2), pages 317-340, April.
    50. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373.
    51. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohammad Mafizur Rahman & Istihak Rayhan & Nahid Sultana, 2023. "How Does Electricity Affect Economic Growth? Examining the Role of Government Policy to Selected Four South Asian Countries," Energies, MDPI, vol. 16(3), pages 1-17, February.
    2. Adams, Samuel & Klobodu, Edem Kwame Mensah & Opoku, Eric Evans Osei, 2016. "Energy consumption, political regime and economic growth in sub-Saharan Africa," Energy Policy, Elsevier, vol. 96(C), pages 36-44.
    3. Adu, Frank & Ackah, Ishmael, 2015. "Revisiting the Government Spending and Growth analysis in Ghana: A disaggregated Analysis," MPRA Paper 65043, University Library of Munich, Germany.
    4. Adams, Samuel & Klobodu, Edem Kwame Mensah & Apio, Alfred, 2018. "Renewable and non-renewable energy, regime type and economic growth," Renewable Energy, Elsevier, vol. 125(C), pages 755-767.
    5. Adom, Philip Kofi, 2016. "The DDT Effect: The case of Economic Growth, Public Debt and Democracy Relationship," MPRA Paper 75022, University Library of Munich, Germany, revised 11 Nov 2016.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hibrahim Limi Kouotou & Boniface Ngah Epo, 2022. "Duration of heads of state in power and economic growth: a Sub-Saharan African tale," Economics Bulletin, AccessEcon, vol. 42(2), pages 1153-1170.
    2. Brittle, Shane, 2009. "Ricardian Equivalence and the Efficacy of Fiscal Policy in Australia," Economics Working Papers wp09-10, School of Economics, University of Wollongong, NSW, Australia.
    3. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    4. Adom, Philip Kofi, 2016. "The DDT Effect: The case of Economic Growth, Public Debt and Democracy Relationship," MPRA Paper 75022, University Library of Munich, Germany, revised 11 Nov 2016.
    5. Brieger Stefan & Markwardt Gunther, 2020. "The Democracy–Economy-Nexus," Review of Economics, De Gruyter, vol. 71(2), pages 135-167, August.
    6. Sima, Di & Huang, Fali, 2023. "Is democracy good for growth? — Development at political transition time matters," European Journal of Political Economy, Elsevier, vol. 78(C).
    7. Madeeha Gohar Qureshi & Eatzaz Ahmed, 2012. "The Inter-linkages between Democracy and Per Capita GDP Growth: A Cross Country Analysis," PIDE-Working Papers 2012:85, Pakistan Institute of Development Economics.
    8. Hibrahim, Limi Kouotou & Epo, Boniface Ngah, 2023. "Duration of Heads of State in Power and Economic Growth in Sub-Saharan Africa," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 48(1), pages 145-172, March.
    9. Johannes Fedderke, 2001. "Growth and institutions," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 645-670.
    10. Alessandro Melcarne & Juan S. Mora-Sanguinetti & Rok Spruk, 2021. "Democracy, technocracy and economic growth: evidence from 20 century Spain," Working Papers 2118, Banco de España.
    11. Freund, Caroline & Jaud, Melise, 2013. "Regime Change, Democracy and Growth," CEPR Discussion Papers 9282, C.E.P.R. Discussion Papers.
    12. Madsen, Jakob B. & Raschky, Paul A. & Skali, Ahmed, 2015. "Does democracy drive income in the world, 1500–2000?," European Economic Review, Elsevier, vol. 78(C), pages 175-195.
    13. Ademola Obafemi Young, 2019. "Growth Impacts of Income Inequality: Empirical Evidence From Nigeria," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 226-262, December.
    14. Audi, Marc & Ali, Amjad, 2017. "Socio-Economic Development, Demographic Changes And Total Labor Productivity In Pakistan: A Co-Integrational and Decomposition Analysis," MPRA Paper 82435, University Library of Munich, Germany, revised Jun 2017.
    15. Norman Gemmell, 2001. "Fiscal Policy in a Growth Framework," WIDER Working Paper Series DP2001-84, World Institute for Development Economic Research (UNU-WIDER).
    16. Uwe Sunde, 2006. "Wirtschaftliche Entwicklung und Demokratie – Ist Demokratie ein Wohlstandsmotor oder ein Wohlstandsprodukt?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(4), pages 471-499, November.
    17. Daniel Oto Peralías & Daniel Oto-Peralías & Diego Romero-Ávila, 2012. "Tracing the Link between Government Size and Growth: The Role of Public Sector Quality," EcoMod2012 4015, EcoMod.
    18. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    19. Mohtadi, Hamid & Roe, Terry L., 1997. "Democracy, rent seeking, and growth: Is there a U curve?," Bulletins 7485, University of Minnesota, Economic Development Center.
    20. Wafa Ghardallou, 2022. "Financial System Development and Democracy: a Panel Smooth Transition Regression Approach for Developing Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 1714-1735, June.

    More about this item

    Keywords

    Democracy; Government Spending; Economic Growth; Cointegration; Ghana;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:mareco:v:6:y:2012:i:3:p:361-383. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.ncaer.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.