Agricultural Productivity, Health and Public Expenditures in Sub-Saharan Africa

Abstract

National governments are forced to make difficult budget allocations regarding the provision of various social services. The wide-ranging effects of these choices are often not fully understood. In particular, farm-level decisions regarding investments and input allocation are likely dependent on government allocations; not accounting for these may bias the estimation of marginal productivity of agricultural inputs. In this article, we capture the impact of social expenditures on health outcomes through a structural equation model, and use a state variable approach to model marginal productivity of agricultural inputs as a function of health outcomes. This study uses agricultural production data from FAO, annual precipitation on agricultural land (compiled by USDA) and IFPRI's unique panel of public expenditure data. It covers nine countries in Sub-Saharan Africa from 1990 until 2002. The results show that there is a positive relationship between health expenditures and the marginal productivity of agricultural inputs.