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Characteristics of Zambia's agricultural sector and the role for agricultural policy: Insights from CGE modelling

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  • Mulanda, Stephen Mulanda
  • Punt, Cecilia

Abstract

The Zambian economy does not follow the standard structural transformation pattern because agriculture's declining share in GDP corresponds to an increase in the share of services and not manufacturing. This paper establishes the relevance of capital as well as transaction costs in structural transformation using a computable general equilibrium (CGE) model. It is found that reducing transaction costs plays a significant role in aiding structural transformation through increases in value-added for all agricultural processing activities in the economy. When capital stock is increased in addition to the transaction cost decreases, the effects are enhanced. This highlights the importance of complementing production policies with market policies to achieve optimal development results. In the combined simulation labour moved out of agriculture to industry with the quantity of labour employed increasing relatively more for the agricultural processing subsector. The paper also confirms a well-known finding that agricultural led economic growth is poverty-reducing.

Suggested Citation

  • Mulanda, Stephen Mulanda & Punt, Cecilia, 2021. "Characteristics of Zambia's agricultural sector and the role for agricultural policy: Insights from CGE modelling," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 300-312.
    • Handle: RePEc:eee:streco:v:58:y:2021:i:c:p:300-312
    DOI: 10.1016/j.strueco.2021.06.008
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    More about this item

    Keywords

    Structural transformation; Transaction cost; Zambia; Social accounting matrix; CGE model;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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