A comparative analysis of the impact of public agricultural spending on food production: Empirical evidence from Sub-Saharan Africa and Asia : A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Commerce at Lincoln University

Abstract

Public spending on agriculture has manifold benefits. It not only enables agricultural innovation and diffusion of technology, but also increases productivity and reduces poverty rates. Through the Maputo (2003) and Malabo (2014) declarations, African countries agreed to dedicate 10% of public funds to agriculture. Even though most of the countries in Sub-Saharan Africa (SSA) have not honoured this commitment, public spending on agriculture has increased significantly over the years in most low-income and lower-middle-income countries. Like SSA, South and South East Asian countries have increased their spending on agricultre via input subsidies for crop production, greater mechanisation, and research and development funds. However, despite sharing similar economic attributes, Asia has made greater progress in improving food production. As a result, this region has better food security than Sub-Saharan Africa where productivity has lagged and, in some countries, stagnated over the sampled period. This research evaluates the impact of public agricultural spending on food production in Sub-Saharan Africa and Asia. More specifically, we analyse the role played by institutional quality in the effectiveness of public agricultural spending in improving food production. This research uses country-level panel data for 25 countries in Sub-Saharan Africa and Asia to examine a 22-year period. Using a Fixed Effects (FE) model, we establish a positive relationship between public agricultural spending and food production. The results also show that public agricultural spending influences food production in countries with highly effective governments, and has no effect in countries with less effective governments. This finding indicates that while public spending in agriculture is a reliable measure for improving food production, the quality of the institutions determines the impact it ultimately has on food production.