The Determinants of Agricultural Output Growth in Ethiopia

Abstract

The purpose of this paper is to look into the determinants of agricultural output growth in Ethiopia. Along with this general objective, this study intends to look at the trend of total factor productivity growth in the agricultural sector and its contribution to agricultural output growth. Using autoregressive distributed lag model bounds testing, this research estimates the long-run and short-run cointegration between agricultural output growth and the total factor productivity. In this study, Augmented Dickey-Fuller and Phillip-Perron unit root tests were used to find out the order of integration of the variables. The selected econometric model goes through all the diagnostic tests and confirms the absence of heteroscedasticity, serial correlation, and normality. The finding of this study indicates that total factor productivity, agricultural land, agricultural machinery, and fertilizer all have a significant and positive effect on the growth of agricultural output. According to the findings of this study, total factor productivity is the primary driver of agricultural output growth. Therefore, as it has played a strong role in developed countries' agriculture, total factor productivity has the potential to be a game-changer in terms of sustainable agricultural growth. Taking into account the findings of this study, we strongly recommend that the government of Ethiopia should devise policies in the agricultural sector that could enhance the level of total factor productivity.