Effects of Government Fiscal Policy on Household Income Growth: A Case Study of Government Expenditure through CDF in Lusaka District Zambia

This study aimed at assessing the effects of the government expenditure, a form of fiscal policy through the Constituency Development Fund (CDF) on the income growth of the households in the Lusaka District were assessed in this study. The impact of the government through the CDF and the income growth of the households in the Lusaka District were assessed in this study. The findings showed that households located in the vicinity of CDF-funded socio-economic infrastructure recorded significant income gains. The Difference-in-Differences (DID) results showed that the households in the wards with active CDF implementation had an average of 12.4% income increase (p < 0.01). The mean income comparisons revealed that high-activity wards (ZMW 2,800) had higher earnings when compared to low-activity wards (ZMW 2,350). Regression analysis showed a positive correlation between accessibility of infrastructure and income, and the corresponding significant coefficient was β = 0.212 (p < 0.01). The study also highlighted governance-related issues, indicating the wards differed considerably in terms of transparency and participation. A Transparency Index drawn from household responses indicated a mean score of 14.8, with wards that had CDF active receiving a lot higher score (t = 6.27, p < 0.001). The community participation was found to have a moderate positive correlation with project performance (r = 0.42, p < 0.01). Even with these benefits, the respondents cited project information being poorly communicated, community inadequate involvement in decision-making, and elite influence being among the main challenges faced. The net result of the study was to show that CDF spending is associated with a rise in income of the households but at the same time transparency and participation in governance are the decisive factors that determine the level of benefit. The study recommends that the developmental impact of CDF be maximized by strengthening public information systems, improving participatory structures and enhancing oversight.