Analysis of public spending and food production in Sub-Saharan Africa – A cross country analysis

Abstract

Public spending in agriculture is important for innovation in agriculture, adoption of technology, and consequently productivity growth and poverty reduction. Subsequently, African countries through the Maputo and Malabo declarations, committed to increase public spending in agriculture by 10 percent. Even though most countries in Sub-Saharan Africa have not honoured this commitment, public spending in agriculture has significantly increased over the years. The aforementioned notwithstanding, the region has experienced a decline in per capita food production. In this paper, we evaluate the impact of public spending on agriculture on food production in Sub-Saharan Africa. Furthermore, we analyse the role played by institutional quality in the effectiveness of public agricultural spending for improving food production. Country-level panel data has been collected for 17 countries in Sub-Saharan Africa, for a period of 36 years. Estimation results from a fixed effects model, establish a positive relationship between food production and public agricultural spending. The quadratic expression of the per capita public agricultural spending variable in the model was significant and positive, indicating diminishing marginal returns of public spending. While government effectiveness, a measure of institutional quality is statistically significant, it is negative, showing that, institutional quality alone does not drive production. The interaction term for institutional quality and food production is not statistically significant either, implying that institutional quality does not influence the effectiveness of public agricultural spending in increasing food production. This result show that public spending in agriculture is a pertinent measure in improving food production, but poverty may affect the role played by institutions in enhancing its effectiveness.