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Abstract
Several recent IFPRI studies have measured the effects of public spending on
growth and poverty reduction in selected Asian countries using pooled time-series
and cross-region data. However, many African countries lack such data. Using
Tanzania as a test case, this study demonstrates how household survey data can be
used to assess the impacts of public investments on growth and poverty. A two step
procedure is used. First, household survey data are used to link household welfare
measures to human capital and household access to infrastructure and technology,
while controlling for other community and household characteristics. The second
step links household human capital and access to infrastructure and technology to
past public investments in these factors. As in the Asian studies, the growth effects
(measured as per capita income) of investments in agricultural research, roads, and
education are found to be large. But unlike Asia, no clear distinction emerges
between the measured impacts for high and low potential areas. In many high
potential areas, returns to investments are still high and there is no sign of any
diminishing marginal returns. This suggests that there has been insufficient public
investment in all kinds of regions. Nevertheless, the results show that there is
opportunity to improve on the growth and poverty impacts of total public investment
through better regional targeting of specific types of investment. For example,
additional investments in rural education have attractive growth and poverty impacts
in all regions, whereas additional investments in roads and agricultural research are
better spent in the central and southern regions of the country.