Analysis of Foreign Direct Investment, Agricultural Sector and Economic Growth in Tanzania

Abstract

This paper analyzes the effect of foreign direct investment (FDI) on agricultural sector in Tanzania. The paper also examines the declining contribution of agriculture to real GDP growth despite the fact that the sector employs more than 70 percent of the total labour force. Annual time series data spanning from 1990 to 2015 are used to test the significance of the relationship between FDI inflow and agriculture value added-to-GDP ratio on one hand and FDI inflows and economic growth on the other hand. Also, the relationship between agriculture value added and economic growth rate is empirically examined. Variables such as gross fixed capital formation, inflation rate, trade liberalization, real exchange rate and population are considered as control variables. For the purpose of inference, the paper employs classical linear regression model. Ordinary least squares methods are used for estimation. The diagnostic tests including RESET regression errors specification test, Breusch-Godfrey serial correlation LM test, Jacque-Bera-normality test and white heteroskedasticity test reveal that the models have no signs of misspecification and that, the residuals are serially uncorrelated, normally distributed and homoskedastic. Interestingly, empirical results suggest that there is no significant effect of FDI inflows on agriculture value added-to-GDP ratio in Tanzania despite the fact that FDI inflows in economy have been outstanding particularly in past two decades. Unsurprisingly, the results show that FDI inflows-to-GDP ratio and real GDP growth rate are positively correlated. Notwithstanding, agriculture sector, which constitutes the largest proportion of the total labour force, contributes, on average, less than 30 percent, to total GDP. This suggests that the sector is inefficient and therefore, effort towards attracting more FDI aiming at improving productivity in agriculture sector, which in turn may reduce poverty, is much needed.

Does Chinese FDI, Climate Change, and CO2 Emissions Stimulate Agricultural Productivity? An Empirical Evidence from Pakistan

“…Therefore, the Pakistani government has taken steps to attract foreign direct investment by providing special incentives so that the agricultural sector gets benefits from technological spillovers and ensures an increase in production and growth. Such FDI inflows trends in different developing countries showed significant role in enhancing economic growth, boosting technological level of country and created huge employment opportunities [9][10][11][12].…”

Capital inflows, exchange rate and agricultural output in Nigeria

“…However, despite the positive impacts of capital inflows on agricultural output, some scholars still have opposing views based on their research finding. Larson and Vogel [25], Massoud [26], Djokoto [12,13], Iddrisu et al [20], Epaphra [15], Epaphra and Mwakalasya [16]; documented that the inflow of foreign capital affects agricultural output negatively.…”

“…Against the foregoing background, this study examines the effect of capital inflows, and exchange rate on agricultural output in Nigeria in a bid to answer the research question whether capital inflows and exchange rate affect agricultural output in the country. This research paper differs from existing literature because majority of the empirical work done in this area considers only the private flow component of capital inflow (foreign direct investment) and its effect on agricultural output [12,16,32,40,41,43] while ignoring the public flow component of capital inflows thus providing the motivation for the study. Also, by investigating the effect of public capital inflows alongside private capital inflows, and exchange rate on the agricultural output in the country using an ARDL technique, the study has filled the gap in the literature.…”

An Empirical Study on the Relationship between Agricultural Science and Technology Input and Agricultural Economic Growth Based on E-Commerce Model

“…Therefore, studying the development model of agricultural e-commerce in the new environment has important theoretical and practical value [4]. Mobile Internet technology, cloud computing technology, and big data processing technology provides a guarantee for the implementation of agricultural e-commerce [5]. With the improvement of rural informatization infrastructure, the popularity of 4G networks in rural areas, and the increasing availability of high-end smartphones, the number of rural netizens has grown rapidly [6].…”