Intra-Africa Agricultural Trade, Governance Quality and Agricultural Total Factor Productivity: Evidence from a Panel Vector Autoregressive Model

The agricultural sector is regarded as a fertile ground for achieving the African Continental Free Trade Area ambitions. However, agricultural productivity in Africa is low and falling. It is argued that intra-Africa trade and good governance can help increase agricultural productivity. Nonetheless, both are low, casting doubt on their ability to enhance agricultural productivity. This study attempts for the first time to examine the causal relationship between the intra-Africa agricultural trade, governance quality, and the agricultural total factor productivity (ATFP) for 47 countries over the period 1995–2018. We extend the analysis to regional economic communities (RECs) to understand the diversity in this relationship within the continent. Using the panel VAR model in the generalized method of moment (GMM) estimation approach, our results suggest a long-run equilibrium relationship between the three variables. Specifically, the results indicate that at the African level, intra-Africa agricultural trade has a statistically positive effect on governance quality and ATFP. In contrast, good governance has positive and negative impacts on ATFP and trade, respectively. We also find that ATFP positively influences intra-African agricultural trade and governance. At the RECs level, our estimations show significant heterogeneity in the three variables’ impacts. Policy implications are discussed.