AID-TO-PRODUCTION, CONSUMPTION, AND AGRICULTURAL GROWTH IN DEVELOPING COUNTRIES

Abstract

The paper assessed the effect of economic policy on the effects of aid to agricultural production and consumption on agricultural growth in developing countries. We used data from a panel of 117 countries from 1996 to 2020 fitted to a GMM estimator. We found that both aid-to-production and aid-for-consumption discourage agricultural growth. Economic policy independently enhances agricultural growth. Foreign direct investment promotes agricultural growth. In the presence of economic policy, whilst aid-to-production did not discourage agricultural growth, it worsened the effect of aid-to-consumption on agricultural growth. Among other recommendations, developing countries should seek less foreign aid-toproduction and more FDI into agricultural production as both the former and the latter would increase agricultural growth. Governments in developing countries must enhance trade and macroeconomic policies and promote FDI as this would increase agricultural growth.

Keywords

• agricultural aid
• aid effectiveness
• developing countries
• food aid
• growth