The Impact of Government Expenditure on the Agricultural Sector in Jamaica: 1962-2011

Agriculture is an important component in the socio-economic landscape of Jamaica, but its performance since independence, measured in terms of its contribution to the gross domestic product, has registered a downward slide, moving from 13.5 per cent in 1962 to 6.4 per cent in 2011. Attempts have been made by the government to stem the downward slide, yet the sector continues to produce at sub-optimal levels in relation to the available natural resources. The objective of this paper is to estimate the link between the contribution of agriculture to GDP and the ratio of government expenditure to total budgetary expenditure, using a VAR model. The empirical evidence shows that government expenditure policy and the rate of inflation have a positive impact on the performance of the agriculture sector in terms of its contribution to GDP. The size of the coefficient for agriculture expenditure is 0.042, while it is 0.0017 for inflation.