Impact of Human Capital Development and Fixed Capital Formation on Agriculture Productivity in Uganda

Abstract

This study was inspired by the fact that Uganda‟s economic development prospect is intertwined with agriculture sector growth. The country has 80% of arable land, but only 35% is under production majorly using subsistence suboptimal methods. This thesis sought to deepen the understanding of agriculture and education nexus and the low transformation of the agriculture sector in Uganda. This work comes from a background that Uganda‟s education sector has been criticised for churning out half-baked graduants at all levels without the necessary skills and capacity to innovate, unlock and exploit critical value chains to spur economic growth. Therefore, this dissertation examines the multiple dimensions of the impact of public spending on education, school enrolment, physical capital formation and labour on agricultural sector output. The study is underpinned by the growing interest in empirical investigations on the effects of public education expenditure and education sector outputs on economic growth in developing countries to inform the education sector policy environment. The study utilised the ARDL framework using annual macroeconomic data from 1982 to 2018. The year 1982 marked the beginning of implementing economic reforms and structural adjustment program after a near economic collapse during the the Idi Amin era in 1970‟s. Theoretically, at sector level, growth in the agriculture sector is positively correlated to a reduction in rural poverty that is still a characteristic of rural households. Results reveal that public expenditure on education has a net positive effect on agriculture sector output. The training of agriculture graduates had a negative long run effect while the short run effects were significant but positive. Similary, phyiscal capital formation and labour force accumulation had short run positive effect on agriculture sector output in a short run, while in the longrun, the effects were negative. This study strongly recommends that the public sector puts in place an incentive system to retain skilled and qualified human resource in the agriculture sector. Further this study puts to the fore the argument that investment in education is still a viable public investment choice that has a positive effect on sectoral output which translates into overall economic growth, and confirms that education expenditure plays a critical role at sectoral level growth.