Government Expenditures, Social Outcomes, and Marginal Productivity of Agricultural Inputs: A Case Study for Tanzania

Using the most recent data from Tanzania, we investigate the impacts of district-level health and education expenditures on marginal productivities of agricultural inputs and overall production. We use a covariance structural model combined with a mixed linear model to account for the endogeneity of social outcomes and technological heterogeneity across districts. Our results confirm the significance of government social expenditures in human capital formation as measured through health and education indicators and their effects on agricultural productivity. Indeed, the marginal productivities of inputs (labor in particular) respond significantly and positively to health and education outcomes, especially considered jointly. The impacts also seem to be a function of the type of health constraint, with short-term health factors such as malaria and diarrhea impacting productivity from seeds and fertilizer while longer-term health constraints seem to have greater impacts on labor quality and land productivity. Our results also confirm the importance of considering intra-country heterogeneity as well as climate-related constraints, as the results show that annual precipitation has a signification impact on production for all specifications.