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Endogenous structural breaks, public investment in agriculture and agricultural land productivity in Taiwan

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  • Chien-Chiang Lee
  • Yi-Chung Hsu

Abstract

Using time-series data for Taiwan's agricultural sector and with the government's public investment in the agricultural sector serving as a proxy variable for nonfarm current inputs aside from the original labour and capital input variables usually taken into consideration, this article examines the relationship between public investment in agriculture (public investment/land) and agricultural land productivity (output/land) in Taiwan. Our main findings are as follows. First, the cointegration test reveals that public investment in agriculture and the productivity of agricultural land exhibit a significant positive relationship in the long run, where the elasticity of land productivity in relation to public investment in agriculture is 0.55. Second, when controlling for endogenous structural breaks, the long-run equilibrium relationship for the productivity of the agricultural land model is still supported. Third, the results of the weak exogeneity test indicate that a causal relationship exists in the long run between public investment in agriculture and the productivity of land, indicating that the growth of the agricultural sector must in the long run be based on the government's public investment in the agricultural sector. Furthermore, as the agricultural sector grows, this growth is able to stimulate public investment on the part of the government in the agricultural sector, so that the two affect each other. Fourth, from the short-run error correction model estimation, it is found that public investment in agriculture is a major means of adjusting for the disequilibria that occur within the system. Fifth, in the short run, the unidirectional causal relationship in terms of the productivity of agricultural land on public investment in agriculture is established, otherwise it is not established. From this it can be seen that in the short run, the government is unable to reveal the effectiveness of its public investment in agriculture.

Suggested Citation

  • Chien-Chiang Lee & Yi-Chung Hsu, 2009. "Endogenous structural breaks, public investment in agriculture and agricultural land productivity in Taiwan," Applied Economics, Taylor & Francis Journals, vol. 41(1), pages 87-103.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:1:p:87-103
    DOI: 10.1080/00036840601131748
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    Cited by:

    1. Mogues, Tewodaj & Yu, Bingxin & Fan, Shenggen & McBride, Linden, 2012. "The impacts of public investment in and for agriculture: synthesis of the existing evidence," ESA Working Papers 288994, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    2. Vítor João Pereira Domingues Martinho, 2019. "Testing for Structural Changes in the European Union’s Agricultural Sector," Agriculture, MDPI, vol. 9(5), pages 1-21, May.
    3. Yeboah Asuamah, Samuel, 2016. "Modelling the Effect of Investment on Agricultural Productivity in Ghana," MPRA Paper 70606, University Library of Munich, Germany.
    4. Lai, Chung-Hui & Hu, Shih-Wen & Wang, Vey & Chao, Chi-Chur, 2017. "Agricultural R&D, policies, (in)determinacy, and growth," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 328-341.
    5. Megbowon Ebenezer* & Saul Ngarava & Nsikak-Abasi Etim & Oluwabunmi Popoola, 2019. "Impact of Government Expenditure on Agricultural Productivity in South Africa," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 5(12), pages 1734-1742, 12-2019.

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