Abstract This paper examines the effects of regional euro-currency integration on agricultural productivity in Sub-Saharan Africa. We utilize a propensity.

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Abstract This paper examines the effects of regional euro-currency integration on agricultural productivity in Sub-Saharan Africa. We utilize a propensity score matching estimator to estimate the treatment effect of Sub-Saharan African countries joining the CFA Franc Zone on agricultural value-added. Our parameter estimates reveal that CFA Franc Zone membership has positive effects on agricultural value-added. This suggests that as an institutional arrangement, regional currency union membership can improve agricultural productivity in Sub-Saharan Africa, which is an important component of achieving economic growth that is effective in reducing poverty.

Role of Agriculture Agricultural Productivity & CFA Zone Regional Integration Economic Growth

The decline in the real value of output per capita in Sub-Saharan Afrcia relative to its population growth between (Alston and Pardey 2014) poses significant threats to individual welfare, as it could compromise food and human security (Rajaonarison, 2014) for individuals in Sub-Saharan Africa. The decrease in the share of agricultural value added in Africa lead to a significant increase in urbanization with a negative average effect on GDP per capital growth (Markus, 2012).

Given the apparent critical role that agriculture has in reducing poverty (Collier and Dercon, 2014; Dethier and Effenberger, 2012), particularly for the poorest of the poor (Christiaensen, Demery and Kuhl, 2011), institutional and/or policy arrangements that induce increases in agricultural productivity in Sub-Saharan Africa can engender pro-poor economic development (Dorward et.al, 2004; Kidd et.al 2004). The recent inculsive growth strategy embarked by many developing countries can only foster sustatinable growth and development with the revatilization of the agricultural sector.

In this paper, we consider whether a particular institutional arrangement—a regional currency union—can be beneficial for agricultural productivity in Sub-Saharan Africa. We extend the analysis of Elu and Price (2008, 2014), and consider whether membership in the CFA Franc Zone has beneficial and favorable treatment effects in the agricultural sector. We parameterize the treatment effect of currency union membership within the potential outcomes framework (Imbens, 2004; Price, Spriggs and Swinton, 2011) of the Rubin causal model (Imbens and Rubin, 2010). Our results, while limited, will inform the extent to which institutional arrangements such as regional currency unions can enhance economic development in Sub-Saharan Africa through the agricultural sector.

To estimate the treatment effect of currency union membership in Sub-Saharan Africa, we use World Development Indicators (2013) data SSA and Agriculture valued (2014) data from the World Bank.

For country observations indexed by ¡ = 1,...., each observation is characterized by a pair of potential outcomes, Y (0) for the outcome under the control treatment, and Y (1) for the outcome under the treatment of currency union membership. Each unit is exposed to a single treatment such that: Υ = Y (W) = Y (0) if W = 0 = Y (1) if W = 1 We utilize a propensity score matching scheme which selects control observations on the basis of the difference in propensity scores between treated and control observations., and for the heterogeneity that can emerge in panel data. In particular, we estimate country-year-specific propensity scores similar to the panel-specific propensity score matching approaches Millard-Ball (2012) and Nielson and Sheffield (2009).

This paper considered the effects of regional euro-currency integration on agricultural productivity in Sub-Saharan Africa. We utilized a propensity score matching estimator to estimate the treatment effect of Sub-Saharan African countries joining the CFA Franc Zone on agricultural value-added. Investment in Agriculture can enhance regional and transformative and sustainable growth. Increase productivity in Agricultural sector can also serve as a catalyst for enhanced agribusiness. Our parameter estimates reveal that CFA Franc Zone membership has positive effects on agricultural value-added. This suggests that as an institutional arrangement, regional currency union membership can improve agricultural productivity in Sub-Saharan Africa, which is an important component of achieving economic growth that is effective in reducing poverty.

As for limitations, our results are based on only one measure of agricultural productivity. There are other measures of agricultural productivity which are potentially more important for economic development in Sub-Saharan Africa. In future work, our aim is to consider these other measures and the extent to which regional currency unions favorably impact them.