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

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  • Mohammadou Nourou

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

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.

Suggested Citation

  • Mohammadou Nourou, 2020. "The effect of public spending on growth in oil-rich, conflict-prone countries: the case of Chad," Economics Bulletin, AccessEcon, vol. 40(1), pages 556-566.
    • Handle: RePEc:ebl:ecbull:eb-19-01128
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    References listed on IDEAS

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    1. James C. Murdoch & Todd Sandler, 2004. "Civil Wars and Economic Growth: Spatial Dispersion," American Journal of Political Science, John Wiley & Sons, vol. 48(1), pages 138-151, January.
    2. Dunne J. Paul & Tian Nan, 2014. "Conflict Spillovers and Growth in Africa," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(4), pages 539-549, December.
    3. Azam, Jean-Paul, 1995. "How to Pay for the Peace? A Theoretical Framework with References to African Countries," Public Choice, Springer, vol. 83(1-2), pages 173-184, April.
    4. Carmignani, Fabrizio & Kler, Parvinder, 2018. "Your war, my problem: How conflict in a neighbour country hurts domestic development," Economic Modelling, Elsevier, vol. 70(C), pages 484-495.
    5. Mr. H. Takizawa & Mr. E. H. Gardner & Mr. Kenichi Ueda, 2004. "Are Developing Countries Better Off Spending Their Oil Wealth Upfront?," IMF Working Papers 2004/141, International Monetary Fund.
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    Cited by:

    1. Mfouapon Alassa & Kamdem Cyrille Bergaly & Mohammadou Nourou, 2022. "Agricultural Foreign Aid Allocation in Sub-Saharan Africa: The importance of Democracy and Quality of Governance," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(3), pages 84-100, March.

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    More about this item

    Keywords

    Economic growth; military spending; social spending; oil-rich countries;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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