Econometric Analysis of the Dynamic Relationship between Agricultural Research Expenditures and Agricultural Output: Case of Lesotho

Abstract

Agriculture is an important sector in the economy of Lesotho. However its contribution to the country's economy is handicapped by a multiplicity of factors, most importantly, by shortage of arable land, acute soil erosion and poor agricultural practices. As an attempt to improve productivity of the sector, the government of Lesotho has embarked on a number of activities including the establishment of the Lesotho Agricultural Research Division and the agricultural research system. These efforts may have an important impact on the growth of agriculture in Lesotho. It is therefore important to know the extent of contribution of agricultural research to agricultural output. In this study an attempt has been made to investigate the causal relationship between public agricultural research expenditures and agricultural output as well as the lagged response of agricultural output to changes in public agricultural research expenditures. To accomplish these objectives cointegration tests and then Granger-causality tests were performed through the ECM models. Also, the lag length tests were performed through the AIC and SC to investigate the lagged response of agricultural output to agricultural research. The findings of the study suggest that agriculture in Lesotho is driven by agricultural research. Additionally, the study suggest that it takes seven or eight years for public agricultural research expenditures to have a significant impact on agricultural output in Lesotho.