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

Stephen Mulanda Mulanda and Cecilia Punt

Structural Change and Economic Dynamics, 2021, vol. 58, issue C, 300-312

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.

Keywords: Structural transformation; Transaction cost; Zambia; Social accounting matrix; CGE model (search for similar items in EconPapers)
JEL-codes: C68 D23 D24 O10 O55 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:58:y:2021:i:c:p:300-312

DOI: 10.1016/j.strueco.2021.06.008

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