Empirical Evidence of a Long-Run Relationship Between Agriculture and Manufacturing Industry Output in Nigeria

Osuagwu, Eze (2020): Empirical Evidence of a Long-Run Relationship Between Agriculture and Manufacturing Industry Output in Nigeria. Published in: SAGE Open No. Jan - March (March 2020): pp. 1-12.

Abstract

This study investigates a long-run relationship between agriculture and manufacturing industry output in Nigeria using annual time series data from 1982 to 2017. The study employs Granger causality test, vector error correction model, and cointegration techniques to estimate the interdependence between agricultural productivity and manufacturing industry output. Empirical evidence from Granger causality test reveals a bidirectional relationship between agricultural productivity and manufacturing industry output. Although a positive and significant relationship exists in the short- and long-run estimates, a long-run divergence from the vector error correction model indicates that changes in agricultural productivity are not restored to equilibrium, given that macroeconomic factors distort the linkage. Policy implications suggest that macroeconomic stability is a necessary condition for agriculture and manufacturing industry output to foster economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: agriculture, manufacturing industry, Granger causality test, co-integration, vector error correction model
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O25 - Industrial Policy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q18 - Agricultural Policy ; Food Policy

References

Acemoglu, D., & Robinson, J. (2012). Why nations fail. Crown Publishers.

Bernstein, H. (2017). Political economy of agrarian change: Some key concepts and questions. RUDN Journal of Sociology, 17(1), 7–18.

Bhagwati, J., & Srnivasan, T. N. (2002). Trade and poverty in the poor countries. American Economic Review, 92, 180–183. Central Bank of Nigeria (n.d.). Statistical bulletin (Online Resources).

Central Intelligence Agency. (2019). The World Factbook.

Chebbi, H. E., & Lachaal, L. (2007, April 23–25). Agricultural sector and economic growth in Tunisia: Evidence from cointegration and error correction mechanism [Paper presentation]. 103rd EAAE Seminar Adding Value to the Agro-Food Supply Chain in the Future Euro-Mediterranean Space, Barcelona, Spain.

de Souza, J. P. A. (2015). Evidence of growth complementarity between agriculture and industry in developing countries. Structural Change and Economic Dynamics, 34, 1–18.

Desai, R. M., & Rudra, N. (2018). Trade, poverty, and social protection in developing countries. European Journal of Political Economy, 60, 101744.

Diao, X., McMillan, M., & Wangwe, S. (2018). Agricultural labour productivity and industrialization lessons for Africa. Journal of African Economies, 27(1), 28–65.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of American Statistical Association, 74, 427–431.

Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio tests for autoregressive time series with a unit root. Econometrica, 49, 1057–1072.

Engle, R. F., & Granger, C. W. J. (1987). Cointergration and error correction: Representation, estimation and testing. Econometrica, 55(2), 251–276.

Fuglie, K., & Rada, N. (2013). Resources, policies, and agricultural productivity in sub-Saharan Africa (Economic Research Report No. 145). U.S. Department of Agriculture.

Gemmel, N., Lloyd, T. A., & Mathew, M. (2000). Agricultural growth and inter-sectoral linkages in a developing economy. Journal of Agricultural Economics, 51(3), 353–370.

Granger, C. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424–438.

Granger, C. (1981). Some properties of time series data and their use in econometric model specification. Journal of Econometrics, 16, 121–130.

Granger, C., & Newbold, P. (1974). Spurious regressions in econometrics. Journal of Econometrics, 2, 111–120. Gujarati, D. N. (2004). Basic econometrics. McGraw-Hill.

Hirschman, A. O. (1958). The strategy of economic development. Yale University Press.

Ikenwa, K. O., Sulaimon, A. A., & Kuye, O. L. (2017). Transforming the Nigerian Agricultural Sector into an Agribusiness Model–The role of government, business and society. Acta Universitatis Sapientiae, Economics and Business, 5(1), 71–115.

Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica, 59(6), 1551–1580.

Kanwar, S. (2000). Does the dog wag the tail or the tail the dog? Cointegration of Indian agriculture with non-agriculture. Journal of Policy Modeling, 22(5), 533–556.

Koo, W. W., & Lou, J. (1997). The relationship between the agricultural and industrial sectors in Chinese economic development. Department of Agricultural Economics, North Dakota State University. https://core.ac.uk/download/pdf/7062716.pdf

Lin, J., & Koo, W. W. (1990). Economic development in the agricultural and industrial sectors in the People’s Republic of China (Agricultural Economics Report No. 263). Department of Agribusiness and Applied Economics, North Dakota State University.

Mills, T. (1990). Time series techniques for economists. Cambridge University Press. Nigerian

National Bureau of Statistics. (2018). E-library. Ogundari, K., & Awokuse, T. (2016, July 31–August 2). Assessing the contribution of agricultural productivity to food security levels in sub-Saharan African countries [Paper presentation]. Agricultural & Applied Economics Association Annual Meeting, Boston, MA, United States.

Okereke, C., Coke, A., Geebreyesus, M., Ginbo, T., Wakeford, J. J., & Mulugetta, Y. (2019). Governing green industrialization in Africa: Assessing key parameters for a sustainable socio-tech nical transition in the context of Ethiopia. World Development, 115, 279–290.

Olomola, A. S., & Nwafor, M. (2018). Nigeria agriculture sector performance review: A background report for the Nigeria 2017 agriculture joint sector review. https://tasai.org/wp-con tent/themes/tasai2016/info_portal/Nigeria/ag_sector/4.%20 Nigeria_Agriculture_Sector_Review_report_August_2018.pdf

Omorogiuwa, O., Zivkovic, J., & Ademoh, F. (2014). The role of agriculture in the economic development of Nigeria. European Scientific Journal, 10(4), 133–147.

O’Ryani, R., & Miller, S. (2003, October 20–22). The role of agriculture in poverty alleviation, income distribution and economic development: A CGE analysis for Chile. Agricultural and Development Economics Division, Food and Agriculture Organization of the United Nations: The Roles of Agriculture International Conference, Rome, Italy.

Osabohien, R., & Osuagwu, E. (2017, May 7–9). Social protection policies and agricultural output in Nigeria: Empirical investigation using household survey data [Paper presentation]. 4th Covenant University International Conference on E-Governance in Nigeria (CUCEN), Ota, Nigeria.

Osuagwu, E. S., & Olaifa, E. (2018). Effects of oil spills on fish production in the Niger Delta. PLOS ONE, 13, Article e0205114. http://doi.org/10.1371/journal.pone.0205114

Rakhmetullina, S., Isiksal, A. Z., & Chimezi, J. O. (2017). Economic growth, agriculture and industrialization in Nigeria: An ARDL bound testing approach. International Journal of Economic Perspectives, 11(2), 45–54.

Saikia, D. (2009). Agriculture-industry interlinkages: Some theoretical and methodological issues in the Indian context. Munich Personal RePEc Archive. https://mpra.ub.uni-muenchen.de/27820/

Sertoglu, K., Ugural, S., & Bekun, F. V. (2017). The contribution of agricultural sector on economic growth in Nigeria. International Journal of Economics and Financial Issues, 7(1), 547–552.

Subramaniam, V., & Reed, M. (2009, August 16–22). Agricultural inter-sectoral linkages and its contribution to economic growth in the transition countries [Conference session]. International Association of Agricultural Economists Conference, Beijing, China.

Takahiro, F., Mayumi, M., & Tatsufumi, Y. (2006). Industrialization and poverty alleviation: Pro-poor industrialization strategies revisited. United Nations Industrial Development Organization.

Tiffin, R., & Irz, X. (2006). Is agriculture the engine of growth? Agricultural Economics, 35(1), 79–89.

United Nations Department of Economic and Social Affairs: Population Division. (2019). Online resources.

The World Bank Group. (2019). World development indicators. https://data.worldbank.org

Zeira, J., & Zoabi, H. (2015). Economic growth and sector dynamics. European Economic Review, 79, 1–15.