Privatization and Social Spending in the Least Developed African Economies: A Study of Ethiopia

This paper examines the linkage between privatization and social spending in the least developed African economies with reference to Ethiopia. Many previous studies have proved that privatisation has had a direct and positive effect on social welfare. The study used data over ten years, 1994/95-2003/04, and simple econometrics model to test whether or not there is any connectivity between privatisation and social spending. Four major overheads are selected for this study: Education, health, road construction and social welfare. The empirical results show that the connectivity of privatisation in relation to these overheads is weak and fragile, owing to the small size of privatisation programme which was implemented in Ethiopia. War is also identified as an affecting factor on social spending. This study concludes that the objectives when they are set must be compatible with the programme. Inconsistent and lavish objectives may cause damage about the opinion of the particular policy when evaluated.