The effect of public spending on growth in oil-rich, conflict-prone countries: the case of Chad

Mohammadou Nourou ()
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Mohammadou Nourou: Department of Quantitative Methods For Economic Analysis, The University of Maroua

Economics Bulletin, 2020, vol. 40, issue 1, 556-566

Abstract: The aim of this paper is to assess whether the composition of public spending could be used to minimize the growth consequence of fiscal adjustment in conflict-prone countries. We argue that in such countries, reductions in welfare and military spending could have more adverse effects on growth than cuts on other public spending. We test this hypothesis by using a three-stage econometric approach. First, we provide a measure of conflict risk. Second, we estimate a system of simultaneous equations with the risk of conflict and GDP growth as dependent variables; using data from a panel of developing countries. Finally we use the estimated system of simultaneous equations to provide a quantitative post-estimation analysis of the effects of spending cuts, with application to the case of Chad. Results show that welfare spending have the largest and more robust effect on conflict risk and, subsequently, on economic growth. This component of public spending should therefore experience less reductions during fiscal adjustments.

Keywords: Economic growth; military spending; social spending; oil-rich countries (search for similar items in EconPapers)
JEL-codes: E6 H5 (search for similar items in EconPapers)
Date: 2020-02-22
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Citations: View citations in EconPapers (1)

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