Abstract

This study explores the impact of budgetary policies, aimed at an increase in aggregate investments in Senegal on employment and household incomes. The analysis is based on a computable general equilibrium framework, which allows us to capture the multi-faceted microeconomic implications of the chosen macroeconomic policies and uses very interesting recent macro and micro-level data sources. Our results indicate that policy makers in Senegal face serious dilemmas. Reliance on foreign sources of finance tends to improve the welfare of households in the short-to-medium run, but at the expense of further decreasing the international competitiveness of the economy. Drastic reduction of the role of public administration in the economy is a viable alternative that addresses these issues, but only at the expense of deterioration of the incomes of households, especially those involved in the informal sector.

Key words: Investments, computable general equilibrium (CGE) model, employment.