Political Regime and Agricultural Policy: Evidence from 31 Developing Countries

Abstract

ABSTRACT This paper examines the relationship between political regimes and agriculture in developing countries. It studies respective government’s revenue transfers to agricultural tradable commodity sectors in 31 developing countries in Africa, Asia, and Latin America. Fixed-effect and Driscoll–Kraay standard error models are employed to analyse the data, and marginal effect is used to explain the effect of political regime on the government’s agricultural policy. It finds that the more democratic the countries are, the more likely the governments are to reduce taxes on agricultural sectors. It also finds that high and volatile inflation and industrial subsidies are likely to lead to resource extraction from agriculture. It implies that while authoritarian governments are likely to discriminate against rural farmers by increasing the tax rate, their elected counterparts are likely to reduce agricultural taxes.