Expenditure Composition and Economic Development in Benin

Departmental Papers, May 27, 2010

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This paper analyzes expenditure composition and economic development in Benin.
It addresses issues using a stylized model of the Beninese economy that highlights the tradeoff between expenditure on wages and investment.
The model incorporates specific characteristics of the Beninese economy, including:
- the large share of agriculture in employment and GDP,
- the large number of urban unemployed engaged in precarious informal sector activities,
- the strong influence of labor unions in the formal labor market concentrated in the urban areas.

Stylized model spotlighting the tradeoff between expenditure on wages and investment.
Key structural features modeled:
- agriculture’s large share in employment and GDP,
- extensive urban unemployment with many engaged in precarious informal sector activities,
- concentrated formal-sector labor market with strong labor union influence.

The central analytical tradeoff is between wage expenditure (including the wage bill) and public investment spending.
Labor market issues examined include:
- labor demand and labor supply dynamics,
- expected wage levels and wage disparity (rural wage versus urban/formal sector wages),
- number of workers and unemployment in urban areas,
- the role of private sector employment versus public sector (civil service) employment.

Subject: Civil service, Expenditure, Labor, Labor demand, Labor supply, Public investment spending, Wages
Keywords: BeninExpenditure composition, bill yield, Civil service, DP, DPPP, economic development in Benin, economic development in BeninExpenditure composition, expected wage, Labor demand, labor market, Labor supply, number of worker, private sector, public expenditure, Public investment spending, rate of return, rural wage, wage bill, wage demand, wage disparity, wage level, Wages, workers unemployed