Do institutions promote agricultural productivity?

This study examines how economic and political institutions, particularly economic freedom and electoral democracy, influence agricultural productivity. Agricultural productivity is vital for economic growth and development because it ensures food security, improves health outcomes, and increases rural income, which in turn encourages further investment in farming practices and education. Additionally, higher agricultural productivity enables labor to shift to other sectors, enhancing economic diversification and long-term growth. Using data from 158 countries between 1970 and 2019, this study finds that economic freedom has a significant positive effect on agricultural productivity, with a one-standard-deviation increase in economic freedom leading to an 11.2% increase in agricultural labor productivity. Although electoral democracy alone does not significantly affect agricultural productivity, its interaction with economic freedom is positive and statistically significant. This suggests that the benefits of economic freedom are enhanced when electoral democracy exceeds a certain threshold, and vice versa. This study’s findings are robust across various specifications, reinforcing the importance of institutional quality in driving agricultural productivity. Based on these findings, this study concludes that policymakers should consider the synergy between economic freedom and electoral democracy when formulating policies to improve agricultural productivity and promote overall economic growth and development.