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Agriculture, Aid, and Economic Growth in Africa

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  • John W McArthur
  • Jeffrey D Sachs

Abstract

How can foreign aid to agriculture support economic growth in Africa? This paper constructs a geographically indexed applied general equilibrium model that considers pathways through which aid might affect growth and structural transformation of labor markets in the context of soil nutrient variation, minimum subsistence consumption requirements, domestic transport costs, labor mobility, and constraints to self-financing of agricultural inputs. Using plausible parameters, the model is presented for Uganda as an illustrative case. We present three stylized scenarios to demonstrate the potential economy-wide impacts of both soil nutrient loss and replenishment, and how foreign aid can be targeted to support agricultural inputs that boost rural productivity and shift labor to boost real wages. One simulation shows how a temporary program of targeted official development assistance (ODA) for agriculture could generate, contrary to traditional Dutch disease concerns, an expansion in the primary tradable sector and positive permanent productivity and welfare effects, leading to a steady decline in the need for complementary ODA for budget support.

Suggested Citation

  • John W McArthur & Jeffrey D Sachs, 2019. "Agriculture, Aid, and Economic Growth in Africa," The World Bank Economic Review, World Bank, vol. 33(1), pages 1-20.
  • Handle: RePEc:oup:wbecrv:v:33:y:2019:i:1:p:1-20.
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    File URL: http://hdl.handle.net/10.1093/wber/lhx029
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    References listed on IDEAS

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    2. Hiroyuki Takeshima & Bedru B. Balana & Jenny Smart & Hyacinth O. Edeh & Motunrayo Ayowumi Oyeyemi & Kwaw S. Andam, 2022. "Subnational public expenditures, short‐term household‐level welfare, and economic flexibility: Evidence from Nigeria," Agricultural Economics, International Association of Agricultural Economists, vol. 53(5), pages 739-755, September.
    3. Md Ismail Hossain & Md Istiak Hossain & Mollah Aminul Islam & Md Reza Sultanuzzaman, 2022. "Does Foreign Aid Have an Expected Role in the Economic Growth of Bangladesh? An Analysis in ARDL Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 12(6), pages 113-126, November.
    4. Linus Nyiwul & Niraj P. Koirala, 2022. "Role of foreign direct investments in agriculture, forestry and fishing in developing countries," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.
    5. Srofenyoh, Francis Yao & Agyei-Henaku, Kofi Aaron Aboa-Offei & Badu-Prah, Charlotte & Agyeiwaa-Afrane, Akua & Gidiglo, Ferguson Korbla & Djokoto, Justice Gameli, 2023. "Aid-to-Production, Consumption and Agricultural Growth in Developing Countries," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 11(4), October.

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