Impact of agricultural value addition on economic growth in Uganda (1983 - 2018)

Abstract

The agricultural sector is a key in promoting economic growth and development in Uganda. The sector contributes 24.5 percent of the total GDP, employs over 71.9 percent of the total labor force and contributes over 80% of the total exports. The sector also provides the basis for the growth of other sectors such as manufacturing especially agro-processing. Previous literature shows that agricultural value addition plays a key role in accelerating economic growth in developing countries. It presents sufficient opportunities for wealth creation and employment generation, improvement in the balance of payment position and increasing export revenues. Therefore, the government of Uganda is putting up incentives to promote agricultural value addition as an engine of growth. This study examined the impact of agricultural value addition on economic growth from 1983 – 2018 because there is limited empirical evidence on this subject in Uganda. The study uses and modifies the Solow – Swan approach to find out the impact of agricultural value addition on Uganda’s economic growth while accounting for other factors. The study uses annual secondary time series data obtained from the World Bank Database for World Development Indicators of 2019. The study adopted the autoregressive distributed lag estimation approach because the study variables were integrated of different orders (i.e. I (0) and I (1)). The main finding of this study is that agricultural value added has had a positive impact on economic growth in Uganda over the study period. The study recommends that to ensure sustained economic growth overtime, government needs to intensify its initiatives to promote agricultural value addition as an engine of growth. Keywords: Agricultural Value Addition; Autoregressive Distributed Lag; Economic Growth; Solow - Swan