Optimal investment for agricultural growth and poverty reduction in the democratic republic of congo a two-sector economic growth model

Abstract

ABSTRACTWe propose a two-sector economic growth model and solve it numerically using the relaxation algorithm to determine the optimal levels of investment for sustainable agricultural growth and poverty reduction. Overall, our findings suggest that past dismal growth performance and poverty trends in the Democratic Republic of Congo (DRC) are due to sub-optimal investment in agricultural sector. Our results suggest that optimal level of agricultural investment paves the way to achieving both growth and poverty goals faster than it would have been possible otherwise. Over the period 2002-2012, agricultural investment represents only 45% of its optimal levels. Under the optimal investment scenario, agricultural GDP grows faster. However, agricultural GDP growth rate falls significantly behind that of non-agricultural GDP, and thus delay the achievement of growth and poverty goals. Simulation results suggest that additional agricultural investment coupled with improved agricultural inputs productivity will speed up the country’s pace toward achieving growth and poverty reduction targets: a 10% increase in labour productivity combined with a 10% increase in land productivity reduces by 18 years the amount of time within which the CAADP growth goal will be reached and increases the pace of poverty reduction.