A Model of Public Investment Expenditure Dynamics in Less Developed Countries: The Kenyan Case

Abstract

Over the last decade, many less developed countries have relied on large scale public investment programs as the engine for realizing rapid rates of economic growth. As such, one important aspect of the economic development literature has been the attempt to identify policies to relax the financial and absorptive capacity constraints which have limited the attainable levels of investment. There has been a myopic quality to these efforts, in that projects, evaluated as socially profitable, are thereafter assumed to actually realize their full productivity, and thus meaningfully contribute to national economic development. This assumption appears inconsistent with the oft-repeated descriptions of public sector projects as undermaintained, undersupplied and understaffed. In this article, we shall argue that the emphasis on implementing a target level of public investment has been at the expense of the productivity which ongoing projects were designed to realize.