The Nexus between Agricultural Aid and Poverty Alleviation in Sub-Saharan Africa

Abstract

This study’s main objective is to investigate how effective foreign public aid for agriculture is at reducing poverty in sub-Saharan African countries. Employing a methodological framework encompassing linear panel and simultaneous equations models, we endeavor to assess the hypothesis that such aid contributes to poverty reduction via the enhancement of agricultural productivity. Our analysis yields evidence indicating a positive and statistically significant effect of international aid allocated to the agricultural sector on agricultural productivity. A 1% increase in aid per worker is associated with a 0.198% increase in agricultural productivity, holding other factors constant. Furthermore, our findings elucidate that increases in agricultural productivity exert a mitigating influence on poverty levels within the sub-Saharan African context. A 1% increase in agricultural productivity is associated with a 0.02 percentage point decrease in the poverty headcount ratio, on average, all else being equal. The results indicate that foreign aid affects poverty and agricultural productivity in the selected countries. Therefore, it is suggested that international donors increase their aid to foreign agriculture, focusing on methods that boost productivity. Consequently, our results highlight the imperative of maximizing the productivity-oriented outcomes of agricultural aid, thereby enhancing its effectiveness in efforts to reduce poverty.