An Economic Study of the State's Role, Subsidy and Scientific Research in the Development of the Egyptian Agricultural Sector

Abstract

Disaggregation of public agricultural expenditure into its different types of spending (agricultural infrastructure, agricultural research, and farmer's subsidies in the form of input subsidy and output price subsidy) becomes important to cater to the tradeoffs between them and to help policymakers and decision taker in drawing accurate agriculture policy. As such, it is important to understand and analyze the impact of public expenditure on agricultural growth. It is important to depict to what extent the level of governance influence the performances of agricultural growth. All variables were found nonstationary (with unit roots) at a level. After first differencing, the augmented Dickey-Fuller test indicated stationarity in the variables. There was the existence of two co-integration equations in the Johansen test. VECM gives results for both the short-run period and the long-run period. Meanwhile, all variables were insignificant in the short run, maybe that’s happened because; expenditure categories did not have an immediate effect on agricultural GDP, it needs a time lag to appear its influence. Expenditure in agricultural research was in a positive relationshiptogrowthin AGDP but by a low amount. The reason may be that the extension agency in Egypt is weak, that is one reason. The second reason could be; tenure fragmentation, smallholder rural farmers are poor and they cannot afford or afraid of adopting new technologies. Private investment was also a positive sign, with a small amount. However, agricultural lands are allocated to investors, reallocated by them to different sectors like luxury housing. The relationship between the net trade balance of the economy and long-run agricultural growth was insignificant. Despite the government tendency towards diminishing farmer subsidy, there was a positive relationship between farmers' subsidy programs and the growth of AGDP. Governmental investment in infrastructure was in a positive relationship with AGDP growth.