Econometric analysis of short-run and long-run determinants of agricultural value addition in Africa

Abstract

The study investigated the effects of trade openness, electricity consumption, education and technology on agricultural value addition growth in Africa. It used data accessed from World Bank Data Base (1971-2011) which were subjected to econometric tests before applying the bound test for cointegration using Autoregressive Distributed Lag model. Results indicated the existence of a steady-state long-run relationship between agricultural value addition and its hypothesized determinants. Finally, technology (0.446) at p < 0.01and electricity consumption (1.695), at p<0.01 were the major long-run determinants of agricultural value addition growth. However technology (Wald stat = -0.551) with p <0.01, electricity (Wald Stat = 0.246) at p<0.01 and education (Wald F Stat = -0.417) with p < 0.01 explained the variation in agricultural value addition in Africa in the short-run. It was recommended that African nations should invest on electricity generation, technology development and skill acquisitions for developing agricultural value chain on the continent.

Keywords: Agricultural value addition, Trade openness, Autoregressive Distributed Lag Model, Time Series Modeling, electricity consumption