Government spending in the agricultural sector: Optimal ratio with lending and the impact on the agricultural production

  • 71 Views
  • 12 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

An effective government agropolicy should be balanced: To reduce the state budget pressure, it is important to reduce public spending and encourage farmers to use agricultural loans. Reducing public spending should not lead to a shortage in the agricultural market. The paper aims to substantiate the directions of government agropolicy transformation based on the optimal ratio of public expenditures and loans in the agrosector and the dependence of agroproduction dynamics on state financing. The research base is data from 10 countries with different income levels (World Bank), presented in FAOSTAT for 2004–2021. For each country, the optimal (determined by the structural modeling method) and actual proportions between state financing and lending in the agrosector are compared, adjusted for the agroproduction index. The modeling showed that the share of public funds should increase in Germany, Israel, Italy, and the UK and decrease in Azerbaijan and Georgia; the current proportion is optimal in the USA, Russia, Turkey, and Ukraine. Based on a panel regression model with fixed effects, the influence of the actual level of state agrofinancing on the FAO Production Indices of the main types of agroproducts was determined. It is the largest for crops, meat, and milk (a decrease in state funding by USD 1 million threatens to reduce the respective indices by 4.5, 3.47, and 3.79 points), medium for cereals and sugar crops (according to points 2.69 and 2.11), and the smallest for livestock and non-food products (by 1.53 and 0.001 points, respectively).

view full abstract hide full abstract
    • Figure 1. General graphic representation of the structural model
    • Figure 2. First structural model
    • Figure 3. Second structural model
    • Figure 4. Graphic representation of the distribution of simulation residuals for the first and second structural models
    • Figure 5. Graphic representation of the actual and simulated relationship between the level of government expenditure and agricultural credits in Germany, Israel, Italy, and the UK in 2004–2021, % (an increase in government spending on the agricultural se
    • Figure 6. Graphic representation of the actual and simulated relationship between the level of government expenditure and agricultural credits in Azerbaijan and Georgia in 2004–2021, % (a decrease in government spending on the agricultural sector is neces
    • Figure 7. Graphic representation of the actual and simulated relationship between the level of government expenditure and agricultural credits in the USA, Ukraine, Turkey, and Russian Federation in 2004–2021, % (government spending on the agricultural sec
    • Table 1. Input data description
    • Table 2. Current and simulated values of the ratio between the volume of government expenditure (Govcalc) and credits (Credcalc) of the agricultural sector, %
    • Table 3. Results of panel regression modeling of the relationship between the level of state financing of agriculture and key production indices of agricultural products
    • Conceptualization
      Bayali Atashov, Sabina Valiyeva, Nizami Gafarov
    • Formal Analysis
      Bayali Atashov, Sabina Valiyeva
    • Funding acquisition
      Bayali Atashov, Nizami Gafarov
    • Investigation
      Bayali Atashov
    • Methodology
      Bayali Atashov, Sabina Valiyeva, Nizami Gafarov
    • Software
      Bayali Atashov, Nizami Gafarov
    • Validation
      Bayali Atashov, Nizami Gafarov
    • Visualization
      Bayali Atashov, Nizami Gafarov
    • Writing – review & editing
      Bayali Atashov
    • Project administration
      Sabina Valiyeva
    • Resources
      Sabina Valiyeva
    • Supervision
      Sabina Valiyeva
    • Writing – original draft
      Sabina Valiyeva, Nizami Gafarov
    • Data curation
      Nizami Gafarov