The Impact of Foreign Agricultural Aid and Total Foreign Aid on Agricultural Output in African Countries: New Evidence from Panel Data Analysis

Abstract

Official Development Assistance may play an important role in increasing the resources to finance the agriculture sector and improve agricultural outcomes in African countries. Although this is a relevant issue, very few studies have investigated the link between foreign agricultural aid and national agricultural output. Using advanced econometrics techniques, this paper examines the impact of foreign agricultural aid and foreign aid on agriculture output in the panel data set of 29 African countries over the period of 1975–2013. In particular, we employed two estimation methods: Augmented Mean Group and Common Correlated Effects‐2SLS. The first method accounts for heterogeneous slope coefficients across group members and cross‐sectional dependency among variables, whereas the second method accounts for endogenous regressors. Our main findings indicate a small and positive impact of foreign agricultural aid and total foreign aid on agricultural output for low‐ and middle‐income countries. Furthermore, the Pairwise Dumitrescu‐Hurlin Panel Causality test shows evidence of a bidirectional causal relationship between agricultural aid and agricultural output for the full sample, noting that the result changes at the different group income level. Based on the empirical results, recommendations for future policy are given.

Role of foreign direct investments in agriculture, forestry and fishing in developing countries

“…They also find that aid appears to be less effective in countries with large fiscal deficits and high external debt. Instead of using general foreign aid as in Norton et al [ 37 ] and Kherallah et al [ 32 ], Barkat and Alsamara [ 6 ] use data for 29 African countries over the period of 1975–2013 to examine the impact of foreign agricultural aid and foreign aid on agricultural output. Their results show a small and positive impact of foreign agricultural aid and total foreign aid on agricultural output for low- and middle-income countries.…”

Supporting agriculture in developing countries: new insights on the impact of official development assistance using a climate perspective

“…Still, a study by Alabi (2014) investigated the impact of foreign agricultural aid on agricultural GDP and productivity in Sub-Saharan Africa (SSA) concluding that these aid had a positive impact more when are bilateral rather than multilateral. Work by Ssozi et al (2019), Barkat & Alsamara (2019) and Kornher et al (2021) also found positive relationships between aid and growth in agriculture. A positive growth-enhancer effect has been observed also in Kaya et al (2013), where foreign aid to agriculture reduces both directly and indirectly the poverty headcount ratio of recipient countries, a result that confirms the poorest welfareenhancing effect of aid to agriculture.…”

Investigating the Impact of Remittance Outflows and Oil Price on Economic Growth in Gulf Cooperation Council Countries

“…Finally, we employ the most suitable estimation technique (augmented mean group (AMG)) (Eberhardt and Bond, 2009) that considers both heterogeneity and CSD. Traditional panel estimation methods such as DOLS and GMM are not suitable in the presence of heterogeneity and cross-sectional dependency and may lead to spurious results (Alsamara et al, 2018;Barkat and Alsamara, 2019). However, the AMG method allows for variation in the slope coefficients and error variance across countries, and deals with CDS (Eberhardt and Bond, 2009).…”