The bang for the birr: Public expenditures and rural welfare in Ethiopia

Mogues, Tewodaj; Ayele, Gezahegn; Paulos, Zelekawork

doi:10.2499/9780896291690rr160

Cited by 35 publications

(5 citation statements)

References 36 publications

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“…In other words, these different types of public expenditure variously contribute to poverty reduction, economic growth, and enhancing rural welfare. For example, empirical evidence by Mogues et al 2008 indicates that the public investment in road infrastructure has relatively higher return than investment in agriculture, health and education in Ethiopia.…”

Section: Literature Reviewmentioning

confidence: 99%

Public expenditure for water facility and road transport infrastructure in Ethiopia: A comparison of impacts using an economy-wide model

Mosa

2022

Preprint

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Background: Ethiopian government is investing in a wide range of pro-poor sectors but the economic effects of public investment widely vary across sectors. With a limited public resource, public investment across sectors has to be prioritized based on their potential socio-economic contributions and/or economy-wide benefits. Therefore, the objective of this study is to compare and explore the economy-wide returns of public expenditure on water facility and energy technology (such as improved cooking stoves) on the one hand and public expenditure on road infrastructure on the other hand.Methods: The source of data for this study is the 2005/06 updated Social Accounting Matrix (SAM) of Ethiopia. The analysis applies the STAGE Computable General Equilibrium (CGE) model developed by McDonald (2007). This study analyses two policy scenarios; the first scenario is an increase in the total factor productivity (TFP) of water fetching and firewood collection activities due to public investment in water facility and improved cooking stoves and the second scenario is a decrease in the trade and transport margins due to public investment in road transport infrastructure. For ensuring the comparability of the return of public expenditure, the same amount of public capital is invested in both scenarios. Results: The simulation outcome indicates that public investment in water facility and improved stoves results relatively higher domestic production in most sectors, larger household consumption, improved household welfare and improve in the major macroeconomic indicators (GDP, absorption, private consumption, and total domestic production) as compared to public investment in road transport infrastructure. Conclusion: It is conducive to explore the potential economic contribution of public expenditure across the different pro-poor sectors before launching public investment in any specific sector. This will ensure limited public budgets are appropriately invested in the sector that can bring relatively highest economic-wide benefits to the wider society.

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Section: Literature Reviewmentioning

confidence: 99%

Public expenditure for water facility and road transport infrastructure in Ethiopia: A comparison of impacts using an economy-wide model

Mosa

2022

Preprint

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“…The authors argue that rural investments are more important for poverty reduction than for growth. Biru, Zeller, and Loos (2018) find that government‐supported agricultural programmes do have substantial success in reducing poverty, but Mogues (2011) claims that APS does not increase rural welfare in Ethiopia.…”

Section: Previous Researchmentioning

confidence: 99%

A green revolution in sub‐Saharan Africa? The transformation of Ethiopia's agricultural sector

Till

2021

J of Intl Development

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As the widespread pessimism about African agriculture has receded, policies for a green revolution in Africa are again called for. This study explores the presence of a national‐level green revolution in Ethiopia and finds that an Ethiopian green revolution has taken place since the mid‐1990s, mainly among staple‐growing smallholders in agroecologically favourable areas and that the state has played a central role in this transformation via public spending on agriculture. It concludes that there is scope for states in today's low‐income countries to take a leading role in the transformation of their agricultural sectors.

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“…Fan and Zhang (2008) and Tijani, Oluwasola, and Baruwa (2016) studied public expenditure in support of agriculture and rural development, and observed significant and positive effects on growth and welfare. Likewise, using district‐ and regional‐level public expenditure data and household‐level production data and analysing the cases of Malawi, Ethiopia and Ghana, respectively, Benin, Thurlow, Diao, McCool, and Simtowe (2008), Mogues (2011) and Benin, Mogues, Cudjoe, and Randriamamonjy (2009) found that the provision of various public goods and services in agriculture and allied sectors (education, health and rural roads) have substantial impact on agricultural productivity and rural welfare.…”

Section: Public Expenditure Agricultural Performance and Poverty Reduction Nexusmentioning

confidence: 99%

“…This calls for a robust analysis of the welfare and food security implications of the strategic objectives and the accompanying investment areas such that governments can properly gear their scarce resources towards those investment options that can bring about greater returns. However, so far, relatively few studies have provided guidance for public resource allocation across competing agricultural investment options in the African context (Mogues, 2011; Pauw & Thurlow, 2014; Benfica et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

Public spending on agricultural productivity and rural commercialization: A comparison of impacts using an economy‐wide approach

Aragie

Balié

2020

Development Policy Review

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Motivation: Many developing countries have identified a set of strategic objectives and a longlist of investment areas to promote agricultural production and ensure food security. However, most of these countries lack the financial and technical capacity to execute all of the strategic objectives and investment areas, calling for a robust comparison of their effects. Purpose: Taking the case of Ethiopia as an example, this study employs an economy-wide model and assesses the relative efficiency of alternative investment options on agricultural performance and household welfare. These agricultural investment policies are evaluated under three alternative funding modalities: budget reallocation, donor financing and tax revenue. Approach and methods: To account for the linkage, and direct and indirect impacts of alternative public expenditure policies, this study adapts an economy-wide general equilibrium model for Ethiopia calibrated to a well disaggregated social accounting matrix representing the economic structure in 2010. Findings: Results show that the public expenditure options examined could cause significantly different production and welfare responses. Productivity-enhancing interventions such as input subsidy and irrigation development have superior output and welfare consequences, while policies aimed at smallholder commercialization such as infrastructural development aimed at cutting marketing margins have the least effect, suggesting a need to first prioritize relaxing supply constraints. This ranking of the agricultural policies is robust to the investment financing modalities considered. We, however, observe that financing these projects through income tax could be detrimental to the welfare of urban households. Policy implications: Results show that in a supply-constrained economy like that of Ethiopia, governments should focus on agricultural production and productivity-enhancing interventions (at least in the short run). Reallocation of public funds towards the policies examined should be a principal funding source as this results in superior outcomes. On the other hand, governments should avoid using income tax as a source of finance since this can be highly detrimental to the welfare of urban households.

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The bang for the birr: Public expenditures and rural welfare in Ethiopia

Cited by 35 publications

References 36 publications

Public expenditure for water facility and road transport infrastructure in Ethiopia: A comparison of impacts using an economy-wide model

Public expenditure for water facility and road transport infrastructure in Ethiopia: A comparison of impacts using an economy-wide model

A green revolution in sub‐Saharan Africa? The transformation of Ethiopia's agricultural sector

Public spending on agricultural productivity and rural commercialization: A comparison of impacts using an economy‐wide approach

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