Human Development, Government Spending and Economic Growth in West Africa

Abstract

This study verifies the role of government spending on the relationship between human development and economic growth in West African Countries using an extension of human development measure. We generate a new measure of human development that considered environmental influence by performing Principal Component Analysis on environmental variables such as: (i) Atmospheric Pollution (i.e. carbondioxide (CO2), (ii) emmissions, fossil fuel energy consumption, methane (CH4) and (iii) Nitrous (N2)) and incorporate welfare measures used by HDI (i.e. Education, Health and Income) to generate a scientifically weighted index (HDIGEN).The study employed Fixed effect method using annual time series data between 1980 and 2017. The results showed that human capital on its own is positively, statistically and significantly related with output. However, when human capital is interacted with government spending (GSHK), negative relation was found, but not statistically significant. These results might not be found wanton in the sense that all the countries under study are documented among the corrupt nations. Most of the funds meant for augmenting human capital might not be spent for the purpose for which they are meant. We found negative relationship between human development and output when we used the most common measure of human development (HDI) and the generated one (HDIGEN), but only the one generated was statistically significant. The results showed that measuring human development requires holistic approach of measure, especially consideration of environmental factors. When we interacted government spending with HDIGEN, we discovered positive relation and statistically significant results, while the interaction of government spending with HDI, showed negative and statistically insignificant results. The implication is that if government of these countries can be sincere in spending on improving environmental factors while focusing on improving human development, sustainable development goal can equally be achieved.