Chapter 63 Development Aid and Agriculture

Publisher Summary This chapter discusses the financial development and economic growth in underdeveloped countries. An observed characteristic of the process of economic development over time, in a market-oriented economy using the price mechanism to allocate resources, is an increase in the number and variety of financial institutions and a substantial rise in the proportion not only of money but also of the total of all financial assets relative to GNP and to tangible wealth. Typical statements indicate that the financial system somehow accommodates—or, to the extent that it malfunctions, it restricts—growth of real per capita output. Such an approach places emphasis on the demand side for financial services; as the economy grows it generates additional and new demands for these services, which bring about a supply response in the growth of the financial system. In this view, the lack of financial institutions in underdeveloped countries is simply an indication of the lack of demand for their services.

There are interesting debates on the influence of foreign aid to agriculture on economic growth in Africa. Some scholars have argued that, despite the inflows, majority of rural smallholder farmers in the continent are extremely poor. The precise channels through which foreign aid is to promote sectoral growth has been inadequately understood from the literature. This paper is a systematic literature review on the empirical evidence of the relationship between agricultural aid and growth in Sub Saharan African countries. The Generalized Methods of Moments and the Granger causality test are the main methodological approaches of papers reviewed and the relationship between agricultural aid and productivity growth is positive and quite significant. However, the results demonstrate a weak synergy between the various forms of agricultural aid and growth. The main recommendation is to have a broader conceptual, theoretical or analytical frameworks that clearly define how agricultural aid influences productivity when measured against other influencing factors. Aid is only a catalyst to growth so, governments must invest and provide the necessary infrastructure and a conducive policy environment for increased productivity and growth.

Do agricultural exports enhance agricultural (economic) growth? Lessons from ECOWAS countries

The present study discusses the growth performance of agricultural and Economic Growth (GDP) in India. Close Relationship between agriculture performance and Economic Growth (GDP). Agriculture growth is one of the most important inputs for economic development. Agriculture production directly causes growth in GDP. Agriculture production plays an essential role in an economy on both demand and supply side. Economic growth in India has largely been associated with increasing Agriculture production. The causal relationship between agricultural performance and economic growth (GDP) in India were using time series from 1980 to 2014 were data gathered from (WB) world development indicator. The study were used Augmented Dickey Fuller (Dickey and Fuller, 1979) and to test for unit root and Granger model to test causality. On the other hand the causality relationships found that there unidirectional relationship were found between Agriculture performance and economic growth which is running from production to economic growth (GDP). Based on the findings, it is recommended that policies aimed at increasing the productivity of crops and Policy-makers should focus more attention to the Small and marginalized farmers. In this paper Granger causality tests were used to examine the relationship between growth performance of agricultural and Economic Growth (GDP).

Introduction More than a decade ago, the World Bank argued that “underlying the litany of Africa’s development problems is a crisis of governance.” Poor quality institutions, weak rule of law, an absence of accountability, tight controls over information, and high levels of corruption still characterize many African states today. Aid levels have been reduced in many parts of Africa during the past decade. Yet in many of the countries with poor governance records, aid continues to contribute a very high percentage of government budgets. This article explores the institutional impact of these high levels of aid and the way that large amounts of aid are delivered. There are many reasons why governance is poor in much of sub-Saharan Africa. Colonialism did little to develop strong, indigenously rooted institutions that could tackle the development demands of modern states. Economic crisis and unsustainable debt, civil wars, and political instability have all taken their toll over the past 2 decades and more. It is difficult to separate the impact of these problems from the possible impact of foreign aid, which is often high in countries that suffer from precisely these problems. Theory provides conflicting guidance here. On the one hand, aid can release governments from binding revenue constraints, enabling them to strengthen domestic institutions and pay higher salaries to civil servants. Aid can provide training and technical assistance to build legal systems and accounting offices. In many countries, aid personnel (sometimes expatriate) manage important government programs, and the infusion of resources and technical assistance can give an important boost to the efficiency and effectiveness of governance, if only in a partial sense. Yet despite these likely benefits, it is also possible that, continued over

1. IntroductionDevelopment economists such as Rostow (1960) and Ranis and Fei (1961) have stressed a positive linkage between agricultural productivity and industrialization. The positive link, however, has been argued to be nonexistent by Matsuyama (1992) in a two-sector endogenous growth model of small-open economies with a low elasticity of agricultural goods and the existence of learning-by-doing only in the domestic manufacturing sector.1 As a result of comparative advantage, higher agricultural productivity solicits labor inputs from the manufacturing sector in his model, leading to lower learning-by-doing and economic growth.Matsuyama's results, however, may not be consistent with what has actually happened in Japan and other East Asian economies. In Japan a land reform has been implemented, and allocation of resources to agricultural research has been increased since the Meiji Restoration. As a result of agricultural technical progress,2 agricultural productivity in Japan is much higher than before the Meiji Restoration. In particular, evidence has shown that the agricultural technical change after the Meiji Restoration tends to increase nonagricultural output by pushing resources out of the agricultural sector into the nonagricultural sector. For example, see Yamaguchi and Binswanger (1975, table 7) for the quantitative effects of the agricultural technical change in Japan on nonagricultural output (column 3) and on input reallocation (columns 5 and 7) in 1880-1965. Similarly, the agricultural technical change was higher in Korea's and Taiwan's early stages of economic development, as they have founded agricultural research institutes and farmers' associations during the Japanese colonial period3 and implemented land reforms after World War II. For evidence, see Mason et al. (1980, chapter 7) for the case of Korea and Thorbecke (1979) for the case of Taiwan. A World Bank (1982, p. 45) study reports that for the 23 developing countries whose agricultural growth rate in the 1970s exceeded 3% a year, 17 countries had a GDP growth rate above 5% a year in the same period. Finally, using cross-country data for 14 Asian developing countries in 1960-1986, Mellor (1995) finds a positive and significant relationship between growth rate of per capita agricultural and nonagricultural GDPs, in which both agricultural and nonagricultural sectors grow more rapidly than 31 sub-Saharan and 20 Latin American countries. These above observations lead to interesting questions as to what mechanism lies in the positive impact of accelerated agricultural growth on nonagricultural growth. What policies might increase the efficiency with which a productive agricultural sector moves a nonagricultural sector forward?The purpose of this study is to revisit the linkages between agricultural productivity and economic growth with a government policy. Our model is based on Matsuyama's (1992) framework, with a small twist, so that we can clearly identify the mechanism leading to a positive relationship. The departure in this article lies in introducing a government, which collects taxes and then conducts expenditures on infrastructures. An important role played by higher agricultural productivity in an early stage of economic development is the one by which it renders the government larger tax revenues, so that larger expenditure on infrastructures is facilitated.4 In a study investigating Taiwan's rice-for-fertilizer bartering system in the 1950s and 1960s, Koo (1996, table 2) finds that the resulting hidden taxes on rice alone account for 10-20% of total tax revenue in the period extending from 1950 to 1969. Along with other taxes, the agricultural sector is thus an important source of government revenue in a developing economy.5 Following Barro (1991), public expenditure on infrastructures is assumed to be productive, in that the learning-by-doing effect of the manufacturing sector becomes enhanced with public expenditure on infrastructures. …

Ethiopia’s national development strategy, A Plan for Accelerated and Sustained Development to End Poverty for 2005/06 to 2009/10 (PASDEP) places a major emphasis on achieving high rates of agricultural and overall economic growth. Consistent with the PASDEP, Ethiopia is also in the process of implementing the Comprehensive Africa Agriculture Development Programme (CAADP) together with other African governments. As part of CAADP, the country has committed itself to meeting targets of devoting at least 10 percent of public expenditures to agriculture and to achieving a 6 percent growth rate in agricultural GDP. Ethiopia has already met these targets in recent years. The challenge remains, however, to continue to devote these public resources and to achieve high growth rates through 2015. This paper analyzes agricultural growth options that can support high levels of agricultural development using a new computable general equilibrium (CGE) model for Ethiopia based on data from the EDRI 2005/06 Ethiopia SAM (Ahmed et al. 2009). The CGE model results indicated that if Ethiopia can meet its targets for crop yields and livestock productivity, then it should be possible to reach and sustain the six percent agricultural growth target during 2006-2015. Even though these yield targets are below the maximum potential yields identified by agricultural field trials, they are still ambitious given the short timeframe of the CAADP initiative (i.e., seven years). Achieving agricultural growth of six percent per year would reduce national poverty to 18.4 percent by 2015, lifting an additional 3.7 million people out of poverty compared to a base simulation using medium term growth rates. Most households are expected to benefit from faster agricultural growth. However, some agro-ecological zones that grow higher value cereals and export-oriented crops and which are better situated to larger urban markets (e.g., the rainfall sufficient highlands) stand to gain more than other parts of the country. Both rural and urban households benefit from faster agricultural growth (and thereby overall economic growth), as rural producers benefit from increased agricultural productivity and incomes, while net purchasers of food in both rural and urban areas benefit from moderate declines in real food prices. Composition of agricultural growth matters, though. Additional growth driven by cereals has larger impacts on poverty reduction, because these crops already constitute a large share of rural incomes and so can contribute substantially to achieving broad-based agricultural growth. Yield improvements in these crops not only benefit farm households directly, by increasing incomes from agricultural production, but also by allowing farmers to diversify their land allocation towards other higher-value crops. Increased productivity of cereals that reduces real cereal prices is also effective at raising rural real incomes and reducing poverty, especially amongst the poorest households. Thus, high priority should be afforded to improving cereals yields and opening market opportunities for upstream processing to reduce demand constraints.

Illustrations Preface Acknowledgments Definition of Economic Development Economic Growth and Development--Concepts and Measurement A Global Profile of Development and Underdevelopment History of Economic Development and Underdevelopment Theories of Economic Growth and Development The Classical Theories of Economic Growth and Development The Neoclassical Theories of Economic Growth and Development The Structuralist Theories of Economic Development Process of Economic Development--Internal Dimensions Capital Accumulation and the Process of Development Population and Human Resources in Development Industrialization in the Process of Development Environmental Issues in the Process of Economic Development Development Planning and Policy Issues Process of Economic Development--External Dimensions International Trade and Economic Development Role of Free Trade and Regional Integration International Finance and Economic Development Index

In 2004 the United Nations University World Institute for Development Economics Research (UNU-WIDER) embarked on a large-scale research project on the ‘Impact of Globalization on the World’s Poor’ co-directed by Machiko Nissanke and Erik Thorbecke. The first conference was essentially conceptual in nature, meant to understand better the various mechanisms and channels through which globalization affects the poor either directly or indirectly. The other three conferences focused on each of the major regions of the developing world: Asia, Africa and Latin America. Theobjectivesofthisintroductionarethreefold:first,toreviewbrieflyhow the forces of globalization influence poverty in general; second, to describe and discuss the main transmission channels and mechanisms; and third to analyze the impact of globalization on Africa and present an overview of the six Africa case studies included in this issue. 1. The Impact of Globalization on the World’s Poor Globalization provides a strong potential for a major reduction in poverty in the developing world because it creates an environment conducive to fastereconomicgrowthandtransmissionofknowledge. 1 However,structural factors and policies within the world economy and national economies have impeded the full transmission of the benefits of the various channels of globalization for poverty reduction. In particular sub-Saharan Africa (SSA) hasbeenrelativelylessaffectedbytheforcesofglobalizationthanotherparts of the world. World income distribution continues to be very unequal and many poor countries particularly in Africa are stagnating. Moreover, there is much empirical evidence that openness contributes to more within-country

paper draws together findings from different elements of a research project examining critical components of pro-poor agricultural growth and of policies that can promote such growth in poor rural economies in South Asia and Sub-Saharan Africa. Agricultural growth, a critical driver in poverty reducing growth in many poor agrarian economies in the past, faces many difficulties in today's poor rural areas in South Asia and Sub-Saharan Africa. Some of these difficulties are endogenous to these areas while others result from broader processes of global change. Active state interventions in 'kick starting' markets in 20th century green revolutions suggest that another major difficulty may be current policies which emphasize the benefits of liberalization and state withdrawal but fail to address critical institutional constraints to market and economic development in poor rural areas. This broad hypothesis was tested in an analysis of the returns (in agricultural growth and poverty reduction) to different government spending in India over the last forty years. The results reject the alternate hypothesis underlying much current policy, that fertilizer and credit subsidies, for example, depressed agricultural growth and poverty reduction in the early stages of agricultural transformation. The results show initially high but then declining impacts from fertilizer subsidies; high benefits from investment in roads, education and agricultural RD low impacts from power subsidies; and intermediate impacts from irrigation investments. These findings demand a fundamental reassessment of policies espousing state withdrawal from markets in poor agrarian economies. Given widespread state failure in many poor agrarian economies today, particularly in Africa, new thinking is urgently needed to find alternative ways of 'kick starting' markets ways which reduce rent seeking opportunities, promote rather than crowd-out private sector investment, and allow the state to withdraw as economic growth proceeds. Authors' Abstract

This study aimed to investigate the effect of economic growth, agricultural growth and energy use on methane (CH4) and nitrous oxide (N2O) emissions in Sudan. Within the context of the EKC, the study applies the OLS, cointegration, vector error correction modelling (VECM) and Granger causality methods. The study has established a long run equilibrium relationship for both CH4 and N2O in their relation to economic growth, agricultural growth and energy use in presence of trade openness (TOP) and inflows of foreign direct investments (FDI). The estimated VECM shows that emissions of CH4 are significantly affected by economic growth, TOP, and FDI with no effect of agricultural growth in the short run while CH4 is found to be significantly affected by economic growth, agricultural growth, TOP and FDI in the long run. The estimated VECM for N2O shows that N2O emissions are more significantly affected by energy use, agricultural growth and FDI with no effect of economic growth in the short run, while N2O is found to be significantly affected by economic growth, agricultural growth, TOP and FDI in the long run. Consistently, findings from the estimated OLS and VECMs show that the EKC does not hold for either CH4, or N2O emissions, and that N2O emissions are more significantly affected by economic growth, agricultural growth and energy use than emissions of CH4. Findings from impulse response and variance decomposition analysis confirm that emissions of N2O are more responsive to economic growth, agricultural growth and energy use than emissions of CH4. Granger causality analysis shows existence of bidirectional relationship between CH4 and agricultural growth, but a unidirectional relationship from CH4 to FDI. For N2O, the study finds a unidirectional relationship running from agricultural growth to N2O, while N2O emissions are found to cause GDP per capita, the squared GDP per capita, OIL consumption and FDI. In terms of causality, these results suggest that emissions of CH4 and N2O have been generated more by agricultural activities than by overall economic activity, and that activities generating N2O emissions in particular have been contributing significantly to economic growth. Within the context of the country’s intended nationally determined contributions, the findings of this study suggest that policies should be directed cautiously but more effectively to control N2O than CH4 emissions. Economic growth could be pursued without significant environmental harm from both CH4 and N2O emissions. However, Sudan should expand adoption of energy efficiency measures, expansion of renewable energy use, place restrictions on production and use of fuel woods and charcoal for low carbon economy and green growth.

Background Agricultural development has the potential to strengthen food security, reduce poverty, and accelerate economic growth, especially in the early stages of development. Considering the important roles that agriculture can play in economic development, foreign aid donors have supported agriculture across developing countries. Method This study examined agricultural aid practices by bilateral donors in two African countries, Ghana and Ethiopia using official aid data. The two economies rely on agriculture, continue to receive agricultural aid, and have widely different governance qualities, with Ghana being considered better governed than Ethiopia. Results The study found that donors to Ghana prioritized agriculture over other aid sectors, whereas donors to Ethiopia did not prioritize agriculture, partly because of urgent humanitarian needs that included direct food assistance. Overall, donors to Ghana appeared to give the country more flexibility with agricultural aid by allocating more budget support, using the state channel, and partnering more with developing country-based non-governmental organizations. Donors to Ethiopia, by contrast, appeared to exert stricter control over agricultural aid by providing minimal budget support, making limited use of the state channel, and engaging negligibly with nongovernmental organizations based in developing countries. The largest donor, the US, shaped the overall profile of agricultural aid to Ghana and Ethiopia. While supporting two identical agricultural sub-sectors in both African countries, the US involved different aid agencies, reflecting greater confidence in Ghana. Conclusion Effective institutions in recipient governments may encourage donors to loosen their control over foreign aid, granting greater flexibility to recipient countries.

Sub-Saharan Africa’s path to industrialization hinges on the interplay between human capital development, investment, and economic growth. Drawing insights from economic development and growth theories, this study examines the key drivers of educational quality, public investment, and economic growth in the region from 1980 to 2022 using conventional growth models. Findings indicate that while increased capital formation enhances educational quality, current investment levels remain insufficient to sustain long-term growth. Economic growth is primarily driven by capital formation, exports, and electricity consumption, but is constrained by the challenges of rapid urbanization. Public investment, in turn, is influenced by urbanization, industrial employment, electricity consumption, and past investment trends. The study underscores the need for strategic investment planning, energy efficiency, and export diversification to support sustainable economic progress. Policymakers should prioritize optimizing public spending, enhancing capital investments, and improving resource management to strengthen education, economic growth, and the role of public investment in regional development.

For the relationship between agriculture and economic development, this issue has been in controversy. This article performs econometric model analysis in the case of China for the year 1952-2007 showing that there has always been an positive relation between agricultural and economic growth and discusses how agriculture makes a contribution to economy growth. We conclude: (1) although the share of agriculture in GDP has declined significantly over time, the contribution of agricultural growth has maintained an upward trend with the elimination of the price index and it has made an important market, foreign exchange, factor (finance and labour), output contributions to nonagricultural growth and then it remains an irreplaceable driving force for economic growth; (2) economic growth strongly does not necessarily need a higher GDP growth rate in the agricultural sector. China should and have strength to enter the stage of industry nurturing agriculture. Enhancing agricultural contributions needs to continue to encourage the transfer of rural labour, raise the level of consumption of rural residents, encourage export and increase farmers' income so that the national economy develops rapidly and orderly.

During the course of 2002-03 the Bank's Operations Evaluation Department (OED) held a series of major events, including seminars and workshops, leading up to the thirtieth anniversary of the founding of OED by Robert McNamara on July 1, 1973. This volume captures the history of OED as related by many of those who participated in making that history. It is divided into four sections. The first part is drawn from a series of presentations made by former directors-general, Operations Evaluation, and senior OED managers. It relates, in roughly chronological presentations, the development of OED from an experimental program to a major department with a record of accomplishment and influence within the Bank and beyond. The second part presents perspectives on OED from two of its most important internal constituencies-the Board of Executive Directors and senior Bank management. Part three considers OED's relationships with its external constituents, including its work on developing evaluation capacity among client countries and its evaluation partnerships with other development organizations. Finally, part four presents a forward-looking appraisal of the challenges of development evaluation from three of its leading thinkers.