Public Investment in Social Services and Income Inequality in Nigeria

Abstract

This study contributes to the body of knowledge by investigating the dynamic effects of public social services investment on income inequality in Nigeria. The motivation for this study is the controversy surrounding the effectiveness of public spending on social services in promoting economic development in developing economies. Thus, this study followed an ex-post factor research design by obtaining annual time series data from the CBN Statistical Bulletin and the National Bureau of Statistics, which were analysed with the application of the autoregressive distributed lag (ARDL) model. Evidence of mixed integration was established from the unit root test results. The series was also found to be co-integrated at the significance level of 5 percent. It was established from the findings that public spending on social services significantly reduced income inequality in the long run. This finding explains the effectiveness of social services spending in income redistribution in the long term. The results also showed that public expenditure on economic services reduced income inequality in the short run. However, total public expenditure, as a percentage of the GDP, has a negative but insignificant effect on income inequality in the long run. This finding casts doubt on the effectiveness of total public expenditure in addressing the problem of income inequality in Nigeria. Given the findings, this paper recommends that policymakers should provide a sustainable path for increased public investments in social services to the required vehicle for equitable income distribution in Nigeria.