Impacts of official development assistance on agricultural growth, savings and agricultural imports

Abstract

This paper explores the links between development assistance, agricultural output growth and imports in 56 developing economies over the period [1974][1975][1976][1977][1978][1979][1980][1981][1982][1983][1984][1985][1986][1987][1988][1989][1990]. Thc empirical model treats agricultural growth and imports, savings and aid as endogenous. The analysis also accounts for differences in macroeconomic policies. The results show that aid had a positive impact on agricultural growth. A robust relationship exits between aid and agricultural imports consistent with the argument that aid helps industrialized countries through market expansion and strengthened trade tics.

The Impact of Foreign Agricultural Aid and Total Foreign Aid on Agricultural Output in African Countries: New Evidence from Panel Data Analysis

“…In addition, aid seems to be less effective in countries where the fiscal deficit and external debt were high. Another study by Kherallah et al (), using a simultaneous equation model for a panel data of 56 developing countries over the period of 1974–1990, found a positive relationship between foreign aid and agricultural growth. Their study demonstrated that a 1% increase in foreign aid led to a 0.75% increase in agricultural growth rate.…”

“…However, the impact of the total aid was positive, while the impact of gross domestic saving was negative for the large group, according to the auteurs, this result is due to the allocation or redeployment of domestic savings to food production (FP) activities in these countries. However, all these studies (Norton et al (); Kherallah et al (); Aboagyea and Gunjal, ()) suffered from the unavailability of data regarding agricultural aid in specific. Therefore, the authors used total aid as the main explanatory variable without distinguishing between aid intended for the agricultural sector and other sectors of ODA.…”

“…This literature review provides a few empirical studies on the impact of foreign aid flows on agricultural growth, so it is actually very difficult to assess whether aid has a positive or negative impact on agricultural sector. Our empirical analysis follows the work of Dewbre et al () and Kherallah et al () using the foreign agricultural aid and total aid (ODA) flows for African countries over the period of 1975–2013.…”

“…Foreign aid for agriculture (FAA) and total foreign aid (ODA) are the main explanatory variables. Other control variables are included such as agriculture labour (L), Arable land (AL), gross domestic saving (SAV), which is considered as an important form of investment in agriculture (Kherallah et al , ) and agricultural imports (IMP) and exports (EXP). According to Kherallah et al (), agricultural exports generate additional revenues that can be used for investment.…”

“…Other control variables are included such as agriculture labour (L), Arable land (AL), gross domestic saving (SAV), which is considered as an important form of investment in agriculture (Kherallah et al , ) and agricultural imports (IMP) and exports (EXP). According to Kherallah et al (), agricultural exports generate additional revenues that can be used for investment. In fact, the production of exportable agriculture goods consolidates a comparative advantage (Rana and Dowling, ), improves competitiveness and total factor productivity through knowledge transmission ((Bangoura, Diaw et al ., ; Bangoura, Barkat et al ., ) and represents an important source of employment, especially for the rural population where the poverty rate is notably the highest (Kherallah et al , ).…”