Substitutability Between Government and Private Consumption in Sub-Saharan Africa

Abstract

The question of whether private and public consumption are complements or substitutes has been an issue of concern and hence, attracted the attention of researchers and policy think tanks. This study therefore investigates this important phenomenon within the context of sub-Saharan Africa (SSA) to inform the design of fiscal policy measures. Using panel data spanning the period 1981–2016 for 21 sub-Saharan African countries, the results indicate that, government and private consumption are substitutes. This indicates that government spending crowds out private consumption in the sub region. Vital policy implications have been provided for consideration based on the findings.