Threshold effects of public procurement on Ghana’s economic development: A budgetary allocation perspective

Abstract

Background: Public procurement is one of Ghana’s largest channels of public expenditure, yet institutional inefficiencies, corruption, and political interference limit its contribution to sustainable development. Empirical evidence on threshold effects – the point beyond which rising procurement budgets yield diminishing economic returns – remains scarce in the Ghanaian context.
Objectives: This study investigates threshold effects of public procurement budget allocations on economic development in Ghana, examining how budgetary levels shape procurement effectiveness and outcomes, and assessing the moderating roles of budget allocation and procurement policy.
Method: A quantitative, deductive design was used. Structured Likert-scale questionnaires were administered to 100 purposively selected procurement managers, finance officers, and decision-makers from public and private organisations. Data were analysed in SPSS using descriptive statistics, Pearson correlation, and hierarchical regression.
Results: Descriptive statistics showed moderate perceptions across variables (means: 2.91–3.00). Correlation revealed a significant negative relationship between budget allocation and procurement effectiveness. Regression confirmed that the threshold effect significantly and negatively predicts economic development, while budget allocation (p = 0.234) and procurement policy (p = 0.419) were non-significant (R² = 0.057).
Conclusion: Exceeding optimal procurement budget thresholds produces diminishing returns; increasing budgets without institutional capacity, transparency, and enforcement does not improve outcomes. Ghana’s procurement system needs strategic budget optimisation, depoliticised decision-making, and sustained capacity development.
Contribution: The study applies a threshold effects framework to Ghanaian public procurement, extending Public Choice and Institutional Theory by showing that political incentives and weak institutional capacity jointly produce non-linear procurement–development relationships, offering guidance for Ghana’s Public Procurement Authority.