Analyzing the Relationship between Government Revenue and Economic Growth in Kenya from 2012-2022 using Multiple Linear Regression

Abstract

The relationship between government revenue and economic growth is a debate that has existed for a long time in the living history.Government revenue impacts economic growth differently within different regions. Some researchers argue that government revenue positively affects economic growth while others argue that the relationship is negative. However, minimal literature exists exploring the relationship between the two variables at country specific level. The objective of this study was to determine the relationship between Government revenue and economic growth in Kenya. The research adopted the correlational study design. The study used secondary data collected from the Central Bank of Kenya, KNBS, and Government records such as the finance Act. We collected data on different sources of Government Revenue such income tax, Value Added Tax (VAT), excise duty, import duty, Other tax income. The study also included data on non-tax revenue. The set of data under the study was from the financial years 2011/2012 to 2022/2023. The analysis has been done by the use of R software. To identify the level of association of the study variables such as GDP,Income tax,VAT,excise tax,import duty,other tax and non-tax revenue, he study employs multiple linear regression analysis. To check on the level of significance, we tested at 5% significant levels. The p-value is 0.008462 which was less than 0.05 hence we reject the null hypothesis and conclude that there is significant positive relationship between Government Revenue and Economic growth in Kenya.