Macroeconomic Determinants of Agricultural Sector Growth in Upper Middle-Income Countries: Is Financial Development Relevant?

Authors

  • Kunofiwa Tsaurai University of South Africa

Keywords:

Agriculture Sector; Determinants; Upper Middle-Income Countries; Panel Data

Abstract

The study investigated the determinants of agricultural sector growth in upper middle-income countries using panel data analysis (panel annual data ranging from 2005 to 2020). The impact of the complementarity between financial and human capital development on agricultural sector growth was also explored in the case of upper middle-income countries. Agricultural sector growth was positively and significantly influenced by its own lag under the dynamic generalized methods of moments (GMM) approach. Fixed effects show that financial development had a significant deleterious impact on agricultural sector growth whilst a significant positive relationship running from financial development towards agricultural sector growth was observed under the pooled ordinary least squares (OLS). The dynamic GMM and the pooled OLS indicates that economic growth’s influence on agricultural sector growth was significantly negative. Fixed effects, random effects and pooled effects show that trade openness’s influence on agriculture sector growth was found to be significantly positive. Fixed and random effects noted that population growth had a significant positive impact on agricultural sector growth whilst population growth’s influence on agricultural sector growth was observed to be significantly deleterious. Consistent with majority of available literature, the study observed that the impact of urbanization on agricultural sector growth was significantly positive. Although the results are mixed, the study urges responsible authorities in upper middle-income countries to enact and implement financial development, trade openness, population increase and urbanization enhancement policies to boost agricultural sector production. Further studies can investigate the other different channels through which financial development can enhance agricultural sector growth in upper middle-income countries.

References

1. Abdullahi, F.A. (2002). Spectrum Memory Guide, Agricultural Science for Senior Secondary Certificate Examination. Ibadan: Spectrum Books Limited.
2. Ado, M.B. and Bello, B.M. (2020). Economic determinants of agricultural productivity in Nigeria, International Journal of Research and Innovation in Social Science, 1V (1X), 418-423.
3. Aye, G.C. and Edoja, P.E. (2017). Effect of economic growth on CO2 emission in developing countries: Evidence from a dynamic panel threshold regression model. General and Applied Economics, https://doi.org/10.1080/23322039.2017.1379239
4. Beckman, J. and Countryman, A.M. (2021). The importance of agriculture in the economy: Impacts from COVID-19, American Journal of Agricultural Economics, 103 (5), 1595-1611.
5. Gilal, M.A. Ajmair, M. and Hussain, K. (2018). Determinants of agricultural sector growth in Pakistan: A time varying parametric approach, Journal of Economics and Sustainable Development, 9 (19), 953-964.
6. Igwe, K. and Esonwune, C. (2011). Determinants of agricultural output: Implication on government funding of agricultural sector in Abia State, Nigeria. Journal of Economics and Sustainable Development, 2 (4), 86-90.
7. Im, K.S. Pesaran, M.H. and Shin, Y. (2003). Testing unit roots in heterogeneous panels. Journal of Econometrics, 115 (1), 53-74.
8. Kakar, M. Kiani, A. and Baig, A. (2016). Determinants of agricultural productivity: Empirical evidence from Pakistan’s economy. Global Economics Review, 1 (1), 1-12.
9. Karim, A.H.M.Z. (2013). Impact of a growing population in agricultural resource management: Exploring the global situation with a micro-level example, Asian Social Science, 9 (15), 14-22.
10. Ketema, A.M. (2020). Determinants of agricultural output in Ethiopia: ARDL approach to co-integration. International Journal of Business and Social Research, 10 (3), 1-10.
11. Khapayi, M and Celliers, P.R. (2016). Factors limiting and preventing emerging farmers to progress to commercial agricultural farming in the King William’s town area of the Eastern Cape province, South Africa. South African Journal of Agricultural Extension, 44 (1), 25-41.
12. Levin, A. Lin, C.F. and Chu, C.S.J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108 (1), 1-24.
13. Liu, J. Wang, M. Yang, L. Rahman, S. and Sriboonchitta, S. (2020). Agricultural productivity growth and its determinants in South and Southeast Asian countries, Sustainability, 12 (2020), 1-21.
14. Nwachukwu, I.N. and Shisanya, C.A. (2017). Determinants of agricultural production in Kenya under climate change, Open Access Library Journal, 4 (5), 1-10.
15. Obiageli, I.A. (2020). Effects of exchange rate on agricultural sector output in Nigeria (1987-2019), International Journal of Innovative Finance and Economics Research, 8 (3), 43-54.
16. Odhiambo, N.M. (2021). Trade openness and energy consumption in sub-Saharan African countries: A multivariate panel Granger causality test, Energy Reports, 7 (November), 7082-7089.
17. Oji-Okoro, I. (2011). Analysis of the contribution of agricultural sector on the Nigerian economic development, World review of business research, 1(1), 191.
18. Olajide, O.T. Akinlabi, B.H. and Tijani, A.A. (2012). Agriculture resource and economic growth in Nigeria, European Scientific Journal, 8 (22), 103-115.
19. Paul, O.S.O. Ekpenyong, B.I. and Bidemi, O.J. (2018). Determinants of agricultural output in Nigeria, International Journal of Science and Management Studies, 1 (4), 1985-2016.
20. Pfister, U. and Kopsidis, M. (2015). Institutions versus demand: Determinants of agricultural development in Saxony, 1660-1850, European Review of Economic History, 19 (2015), 275-293.
21. Potelwa, X.Y. Lubinga, M.H. and Ntshangase, T. (2016). Factors influencing the growth of South Africa’s agricultural exports to world markets, European Scientific Journal, 12 (34), 195-204.
22. Raphael, I.O. and Ukandu, I. (2015). Effect of urbanization on agricultural production in Abia State, International Journal of Agricultural Science, Research and Technology in Extension and Education Systems, 5 (2), 83-89.
23. Rehman, A. Chandio, A.A. Hussain, I. and Jingdong, L. (2019). Fertilizer consumption, water availability and credit distribution: Major factors affecting agricultural productivity in Pakistan, Journal of the Saudi Society of Agricultural Sciences, 18 (2019), 269-274.
24. Shahbaz, M. Shabbir, M.S. and Butt, M.S. (2013). Effect of financial development on agricultural growth in Pakistan new extension from bounds test to level relationships and Granger causality tests, International Journal of Social Economics, 40, 707-728.
25. Shita, A. Kumar, N. and Singh, S. (2018). Determinants of agricultural productivity in Ethiopia: ARDL approach, The Indian Economic Journal, 66 (3-4), 365-374.
26. Trpeski, P. and Cvetanoska, M. (2018). The impact of the main determinants and changes in agricultural labour productivity in Macedonia, European Scientific Journal, 14 (10), 119-135.
27. Tembo, J. (2018). Regional financial integration and its impact on financial sector development: The case of Southern Africa, Unpublished Doctoral Thesis, University of South Africa.
28. Urgessa, T. (2015). The determinants of agricultural productivity and rural household income in Ethiopia. Ethiopian Journal of Economics, XXIV (2), 63-92.
29. Zaika, S. and Gridin, O. (2020). Human capital development in the agricultural economy sector. Technology Audit and Production Reserves, 1 (4), 30-36.
30. Zakaria, M. Jun, W. and Khan, M.F. (2019). Impact of financial development on agricultural productivity in South Asia, Agricultural Economics, 65 (5), 232-239.

Downloads

Published

2022-02-07

Issue

Section

Business Administration and Business Economics