The Contribution of Agriculture Sector to Economic Growth of Ethiopia

Abstract

Agriculture is the backbone and the most important sector in the Ethiopian economy given its contribution to employment, foreign exchange and food security. This particular sector’s performance determines the growth of all other sectors and consequently, the whole national economy. The mainobjective of this paper was to examine the contributions of agricultural sector to the economic growth in Ethiopia within a time frame of the preceding 32 years (1982-2013) using a multiple linear regression analysis. For this purpose, secondary source of data was appropriate in the study because of the nature of the study which was an analysis of the contribution of the agricultural sector for economic growth. The data on all the variables of interest were collected from the WB Data Base series. This study employed Ordinary Least Squares (OLS) estimation technique for the empirical analysis. Descriptive statistics and econometric analysis were the major tools of empirical analyses in the study. In the econometric analysis effort has been made to see the impact of various economic sectors agriculture, industry and service) on the growth of real GDP. The Johanson Maximum Likelihood estimation procedure of co-integration analysis confirmed long run relationships between agriculture growth and GDP. Findings from the empirical analysis of the study indicate that the agricultural sector has a direct and significant effect on GDP of Ethiopia, thus, suggesting that agriculture is an engine of economic growth. The overall research outcomes suggest that the agriculture sector continues to be the dominant driver of GDP growth. Therefore, based on this finding, the study recommends that for Ethiopia to achieve higher GDP growth rate, it has to strengthen the agricultural sector to lead the growth in the Ethiopian economy