Governance and agricultural production efficiency: A cross-country aggregate frontier analysis

Mon Chi Lio*, Jin-Li Hu

*Corresponding author for this work

Research output: Contribution to journalArticle

10 Scopus citations

Abstract

This study uses a stochastic frontier approach to investigate the relationship between six governance indicators and agricultural efficiency. We find that improvements in rule of law, control of corruption and government effectiveness enhance agricultural productivity significantly if each indicator enters the inefficiency equation independently. When all six indicators are included in the equation, we find that an improvement in rule of law raises agricultural efficiency significantly, but increases in voice and accountability and political stability appear to significantly reduce agricultural efficiency. Grouping the six indicators into three dimensions, we find that an improvement in 'respect for institutional framework' raises agricultural efficiency significantly, but an enhancement in 'selection of authority' reduces agricultural efficiency significantly. Our results imply that poorer countries can enhance their agricultural efficiency substantially by strengthening the state and citizens' respect for institutional framework. However, our results show that greater democracy is associated with lower agricultural efficiency. This finding is consistent with interest group capture and political failure arguments of the political economy literature.

Original languageEnglish
Pages (from-to)40-61
Number of pages22
JournalJournal of Agricultural Economics
Volume60
Issue number1
DOIs
StatePublished - 19 Jan 2009

Keywords

  • Agricultural efficiency and productivity
  • Governance
  • Stochastic frontier analysis

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