Analyzing Economy Wide-Impact of Technological Shock on Agricultural Sector in Ethiopia Using DCGE Model: Evidence from Panel Data Analysis

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Addis Ababa University


This study tries to address the economy wide impact of technological shock on agricultural sector. In doing so, we employ a Sequential Dynamic Computable General Equilibrium Model. We also used econometric model i.e. panel data analysis to estimate the value of agricultural TFP of Ethiopia. For these purpose, we utilized the data of 2009/10 SAM of EDRI (Ethiopian Development Research Institute), different years of agricultural sample surveys of CSA, ministry of agriculture, WB, IMF and UNCTAD data. The estimation results panel data of this study shows that fertilizer usage, research & development, farmer training & extension have positive impact on agricultural TFP. But pesticide, irrigation and trade openness have negative impact on agricultural TFP. Despite the fact, in order to investigate the economy wide impact of agricultural TFP (technology) shock, three simulations were made turn by turn, which is induced agricultural TFP by 2.8%( simulation-1), 4.7%( simulation-2) and 5.7%( simulation-3). The results of all simulations were shows a considerable improvement on over all macroeconomics variables, sectorial performance, households income& expenditure, factor income and finally on the welfare of the households. At the end of the day to achieve the above results the paper were recommended the government and policy maker:- first the government gives more emphasis to enhancing agricultural total factor productivity; second, government give a special attention for determinants that driving agricultural total factor productivity (i.e. fertilizer usage, research & development, farmer training & extension) and finally, increasing the productivity of agricultural sector through improving TFP (technology) were prime and better mechanism rather than capital accumulation or land expansion.



Agricultural TFP (technology), Dynamic CGE, Ethiopia, Research & development