The role of foreign capital and economic freedom in sustainable food production: Evidence from DLD countries.

Abstract

In many developing countries, the deficiency in public and private investment has resulted in lower growth rates and stagnation in productivity. The need for a new paradigm of foreign investment and aid in agricultural production is becoming exigent in developing countries. Given the decline in per capita arable land, the rise in production costs, and the increase in population and urbanization, major changes in agriculture have been proposed to boost agricultural production. This present study endeavours to contribute to the existing literature by proving whether foreign capital and economic freedom could catapult food production into the much-anticipated growth. In that regard, we performed GLS with correlated disturbances, system GMM dynamic panel data estimators and D-H causality test. The study found that foreign capital as a whole plays a positive role in food production in developing and least developed countries, but FDI is insignificant in least-developed countries. Moreover, economic freedom plays a positive role in food production in least-developed countries but negative in developing countries. Policymakers and governments should create an enabling environment for sustainable food production.