An assessment on the impact of agricultural spending types on agricultural growth: A case for Zambia, Malawi, South Africa

Abstract

AbstractThis study examines the relationship between agricultural GDP growth and government spending on input subsidies, agricultural research, price support programs and infrastructure development in Zambia, Malawi and South Africa. The study compiled government expenditures to different agricultural areas from the year 2000 to 2014 using a variety of data sources such as government budgets, public expenditure reviews, and working papers. The Augmented Dickey-Fuller test was used for unit root testing and the variables were found to be non-stationary at their levels but stationary after differencing. After testing for co-integration among the variables, the error correction model (VECM) was then employed using the Stata software to assess the impact of government spending components on agricultural GDP growth. The study found agricultural research expenditure to be more growth-enhancing only in Zambia and South Africa. A positive relationship was obtained between agricultural growth and infrastructure expenditure in Zambia and Malawi while spending on infrastructure in South Africa had a lower growth impact. Even though spending on input subsidies in Malawi positively influenced agricultural GDP, contradicting results were observed in Zambia and South Africa. The study recommends the governments in the three countries shift their spending priorities and disburse more funds to more growth-enhancing areas. This study differs from previous studies in that it disaggregates total government expenditure into four crucial components that dominate budgetary expenditures in Sub-Saharan countries and examines as well as compares their impact on agricultural growth.

Keywords

• agricultural expenditure
• agricultural growth
• error correction model
• Sdgs
• CAADP
• Q1