A General Equilibrium Model for Analyzing African Rural Subsistence Economies and an African Green Revolution

Abstract

How can foreign aid support economic growth in Africa? This paper presents a geographically indexed general equilibrium model that enables green revolution-focused macroeconomic analysis in low-income African settings. The model is flexible to parameterization and highlights the role of farmers’ constraints to self-financing of inputs alongside minimum subsistence consumption requirements. It includes particular attention to the challenge of soil productivity and to the effects of official development assistance (ODA) for agricultural inputs and road building. Uganda is used as an illustrative case. The economy’s labor force is predominantly still located in rural areas and remains overwhelmingly focused on staple food production. Under plausible economy-wide parameters, a foreign-financed green revolution package shows a clear anti-Dutch disease result, in which the temporary boost in targeted ODA yields permanent productivity and welfare effects at relatively low cost.