Welfare Achievement in Benin: Exploring the Interaction Between Raw Cashew Nut Export Revenue and Industrialisation

ABSTRACT Welfare remains a major challenge in Africa despite its rich natural and human resource endowments. While agriculture is often a key tool for poverty reduction, especially in Benin, policymakers view industrialization as crucial for tackling unemployment and improving welfare. However, progress in this area remains slow. This study investigates how revenue from agro‐industrialized product exports can achieve welfare in Benin. Thus, data were collected from 1991 to 2022, and ordinary least squares, instrumental variables‐two‐stage least squares, and instrumental variable generalized method of moments were used for estimation. The results revealed that raw cashew nut export revenue and industrialization reduced welfare, while their interaction improved welfare, meaning that revenue from exported agro‐industrialization products, especially from exported cashew nut manufacturing, improved welfare in Benin. Thus, policies aimed at further strengthening agro‐industrialization by continuing the structural transformation in Benin will improve population welfare. However, the government must ensure welfare equity between the rural and urban areas.