The Impact of Agricultural Finance and Public Support on Employment Dynamics: A Comparative Panel Data Analysis by Income Groups
DOI:
https://doi.org/10.63556/tisej.2026.1941Keywords:
Agricultural Finance, Public Expenditure, Labour Market, GMM, Panel Data, Financial InclusionAbstract
This study aims to comparatively analyze the relationship between agricultural financing and employment based on income group differences. Within the framework of the World Bank's income classification, two separate panel datasets were constructed: Panel A, consisting of 33 upper-middle-income countries, and Panel B, covering 41 lower-middle and low-income countries. Unbalanced panel data for the 2011–2023 period, compiled from FAOSTAT and WDI databases, were analyzed using the Two-Step Difference GMM (Arellano-Bond) estimator to address endogeneity and dynamic inertia. The findings reveal that the impact of financing tools varies depending on the income group. In upper-middle-income countries, an increase in agricultural credit shares boosts agricultural employment and reduces general unemployment, indicating a functional credit transmission mechanism. Conversely, the share of public expenditures allocated to agriculture reduces agricultural employment and increases general unemployment in this group. This paradoxical effect is explained by the substitution hypothesis. In lower-middle and low-income countries, neither financing tool has a statistically significant effect on employment, which is associated with financial exclusion and inadequate policy transmission. Finally, strong labor market inertia was detected in all models, confirming the hysteresis effect and showing that policies should be country-specific.
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