Supporting agriculture in developing countries: new insights on the impact of official development assistance using a climate perspective

Abstract

Abstract Agriculture is a major source of food and income for poor and rural households living in developing countries; yet, agricultural systems are increasingly threatened by changing climate conditions that compromise their productivity and resilience. Over time, international aid has provided support to the agricultural systems of recipient countries, though the literature is not unanimous in confirming their effectiveness. To shed light on this issue, the purpose of this work is to assess the efficacy of these aid in increasing the agricultural productivity of recipient nations, employing original approaches. First, to adopt a climate change perspective, we conduct our analysis using a recent classification adopted by the Official Development Assistance—the Rio Markers—which distinguishes aid between adaptation and mitigation to climate change. Second, taking into account that the starting conditions of recipient countries can significantly impact aid effectiveness, we classify 115 developing countries into four subgroups according to their vulnerability and readiness to climate change, as evaluated by the ND-Gain indicators. We perform a two-stage instrumental variable approach within the context of panel models to investigate the potential growth-enhancing impact that different types of agricultural aid may exert on the agriculture Total Factor Productivity in recipient countries. Our findings show that aid to agriculture, especially adaptation aid, has a positive impact on agricultural productivity growth. We also observe that countries with a higher climate readiness benefit the most from aid, whereas countries highly vulnerable and heavily dependent on the agricultural sector are less able to leverage the aid received to the same extent. Overall, our analysis confirms the importance of international aid to the agricultural sector and suggests that accurate impact assessment analyses should also consider a climate perspective to distinguish adaptation from mitigation aid.