Contributions of Investment and Employment to the Agricultural GDP Growth in Egypt: An ARDL Approach

Abstract

This paper explores the impact of investment and employment on Egypt’s agricultural growth during the period 1991 to 2021 using annual time series data. We use the ARDL approach to examine the long-run and short-run relationships among agricultural investment, agricultural employment and agricultural GDP. The results reveal that the variables of interest are bound together in the long run. The long-run relationship and the error correction model are estimated. The accompanying equilibrium correction proves that long-run linkages exist in a meaningful way. Results show that agricultural investment and agricultural employment are major short- and long-run determinants of the agricultural GDP. In the long run, every 1% increase in agricultural employment (AEMP) results in an increase in the agricultural GDP (AGDP) of 3.73%, while every 1% increase in agricultural investment (AINV) improves the AGDP by 0.43%. In the short run, 26% of all disequilibrium-causing motions are adjusted for in a single session. Therefore, it takes 3.85 years for the Egyptian agricultural GDP to achieve the transition from a short-term disequilibrium situation to a long-term equilibrium. Thus, decision makers should increase the rates of investment in the agricultural sector, in parallel to the development of the agricultural labor force in Egypt. Moreover, the increased allocation of public investments and the injection of private investments are highly recommended. In addition, the Egyptian agricultural sector needs improvements regarding human capital development and agricultural training. Finally, the government must initiate comprehensive farmer support services, bolstered farm/non-farm links and the promotion of rural SMEs to serve as the foundation for agricultural and rural development.