Does institutional quality affect the impact of public agricultural spending on food security in Sub-Saharan Africa and Asia?

Abstract

Due to declining or stagnating agricultural productivity and rising food insecurity, African countries agreed to dedicate ten percent of public spending to agriculture under the Maputo and Malabo declarations in 2003 and 2014, respectively. Similarly, Asian countries increased spending on agriculture via input subsidies for crop production, greater mechanisation, and research and development funds. These spending increases are happening in countries with varying levels of institutional quality, and hence, differences in observed outcomes. Using cereal prodution as proxy for the availability dimension of food security, we conduct a comprehensive empirical assessment of the impact of public agricultural spending on food security under heterogeneous institutional quality regimes. We estimate fixed effects models with robust standard errors using an unbalanced panel of 25 countries in Sub-Saharan Africa and Asia over 22 years. The preponderance of evidence suggests that institutional quality plays a significant mediating role on the impact of public agricultural spending on food security. Overall, the magnitude of change in cereal production due to public agricultural spending is larger for countries with higher institutional quality than for those with lower institutional quality. While public investment in agriculture enhances food security, its effectiveness is predicated on improvements in the quality of public institutions. High quality public institutions protect private physical and intellectual property and guide prudent use of public resources.