Date of Award
8-1-2024
Degree Name
Master of Science
Department
Agribusiness Economics
First Advisor
Moon, Wanki
Abstract
The effectiveness of foreign aid in reducing poverty has been a contentious issue in development economics. This paper focuses specifically on aid directed towards agriculture, a sector critical for rural livelihoods and poverty alleviation. It investigates the empirical relationship between agricultural aid flows and poverty levels in 46 developing countries between 1997-2020. Fixed effects panel regressions estimate models with the $2.15/day (based on 2017 PPP) poverty headcount ratio as the outcome variable. The key finding is that agricultural aid has a statistically significant poverty-reducing impact. The regression coefficients indicate that on average, a 1% increase in agricultural aid is associated with a 0.08-1.46% decrease in national poverty rates. This highlights the vital role of rural assistance for global poverty alleviation efforts. Furthermore, the results provide evidence that the poverty-lessening effects of agricultural aid strengthen with higher institutional quality, particularly property rights protections and legal contract enforcement. Beyond agricultural aid, the analysis also confirms past findings regarding the contribution of economic growth, government expenditure, and income inequality to poverty outcomes. Periods of GDP expansion, higher social spending, and more equitable income distributions are linked to falling poverty. In conclusion, the paper argues for prioritizing foreign aid to agriculture and rural sectors based on their higher growth elasticities compared to other activities. Agricultural assistance helps raise smallholder productivity and rural wages. However, complementary institutional reforms may enable aid to realize more significant effects on the incomes of the extremely poor over the long term. Targeted rural aid and economic governance initiatives should feature centrally in strategies for eradicating global extreme poverty.
Access
This thesis is Open Access and may be downloaded by anyone.