The Impact of Government Expenditure on Innovation in Nigeria: An Empirical Analysis
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Abstract
Description
Innovation can be considered as something inventive, fresh, and unique. It could also be in the form of renewing
or changing the way something has been done in the past. The broad objective of this study is to investigate the
long-run impact of government expenditure on innovation in Nigeria; specifically, to examine the long-run effect
of both capital and recurrent expenditure on innovation in Nigeria. The study made use of Schumpeter’s Theory
of Innovation as an underlying theory for study. The study employed the Johansen cointegration test and error
correction model as analytical techniques for this study. The study discovered that there exists a long-run
relationship between government expenditure and innovation in Nigeria. The result of error correction modelis
negative and significant. It indicates that previous period’s deviation from long run equilibrium is corrected in
the current period at an adjustment speed of 2.27%. The coefficient reveals that the speed of adjustment between
the short-run and long-run realities of the cointegrating equations is 2.27% in a period. Based on the findings the
study recommended that since there is a long-run relationship between innovation and government expenditure,
there is a need for government to increase both capital and recurrent expenditure to boost research and
development in Nigeria which will have a transmission impact on the economy. The study also recommended the
need to innovate both public-private partnership investments in Nigeria.
Keywords
HB Economic Theory, HJ Public Finance