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