Over the past two decades, there has been unprecedented attention to the promotion of human development via government spending in the social sectors as a conditio sine qua non for economic growth and improved aggregate welfare. Yet the existing evidence on the subject remains limited and contested. This paper contributes to the literature by examining the causal effect of government spending on the social sectors (health, education and social protection) on three measures of aggregate welfare: the Human Development Index, the Inequality-adjusted Human Development Index and child mortality rates, using longitudinal data from 55 low-income and middle-income countries from 1990 to 2009. We find strong evidence to support the proposition that government social spending has played a significant role in improving aggregate welfare in the developing world. Our results are fairly robust to, inter alia, the method of estimation, the set of control variables and the use of alternative samples and instruments.

Plummeting commodity prices, China's economic slowdown and rebalancing, and global financial market turbulence have recently raised concerns about their effects on African economies. This paper investigates whether, and to what extent, these intertwined shocks spillover into the Tanzanian economy. The author finds that a 1 percentage point (ppts) drop in China's investment growth is associated with a decline in Tanzania's export growth of roughly 0.60 ppts. A 1 percent fall in commodity prices leads to 0.65 percent lower exports value. The results suggest that a hard landing of the Chinese economy to its 'new normal' would doubtless send shock waves through the Tanzanian economy by further driving down commodity demand and prices as well as lowering development finance. In contrast, financial market volatility has a fairly negligible impact on economic growth. The main results stand up well to a wide-array of robustness checks. JEL C32 F4 O11

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.