Investment development path for developed economies: Is agriculture different?

Abstract

Literature reports that developed countries are expected to be in stage IV or V (high economic development) in the investment development path (IDP). Knowing the IDP stage of a country shows the cross-border attractiveness of the economy, the circuitousness of firms expanding beyond the home border, and an indication for the formulation of appropriate economic policies. As this theoretical proposition is based on the total economy, we investigated the plausibility of this theory for the agricultural sector in developed countries. Using the generalised least squares estimator, we employed data on 26 developed countries from 1990 to 2021. We found that developed countries’ agriculture is in the first phase of stage V. This is consistent with the theoretical background for developed countries regarding the total economy and demonstrates how the IDP theory for industrialised countries’ overall economies and their agricultural systems are compatible. Agricultural multinationals in developed countries must continue to get globalised through a more interlocking network of trans-border supportive arrangements such as production and market sharing. Moreover, additional acquisition of farm assets and development of the same would balance place-bound assets, leading to further fluctuation of the net outward foreign direct investment and creating smaller transient amplitudes of the curve.

Keywords

• agriculture
• inward foreign direct investment
• gross domestic product per capita
• outward foreign direct investment
• trade