What does the OECD-FAO Agricultural Outlook 2017-2026 imply for income distribution in the Sudan and Ethiopia

The OECD and FAO provide growth paths (projections over a period of 10 years) for the agricultural sectors of different countries in their joint OECD-FAO Agricultural Outlook. This study assesses the implication of the projected agricultural growth paths for the Sudan and Ethiopia on the structures of the economies and the distribution of incomes among the different household groups in the two countries. First, single country, recursive dynamic computable general equilibrium (CGE) models for the two countries were calibrated to the most recent social accounting matrices (SAMs) of the two countries. Second, a baseline scenario for each country was developed until 2026. These projections were based on GDP projections (value, growth rates and composition) developed by the IMF World Economic Outlook, the World Bank World Development Indicators and the national statistical offices in the two countries. Third, the growth paths of the OECD-FAO Agricultural Outlook were implemented for the agricultural sectors of the two countries while preserving the aggregate GDP projections. Finally, results of the models under the OEDC-FAO growth paths are reported with a special focus on the distribution of income in the two countries. The main findings highlight that, in both countries, agricultural growth is significantly behind that of industry and services. Due to the slower growth, returns to factors of production (e.g. labor and capital) employed in agriculture are much lower than to those employed in the other economic sectors. Unless sensible interventions are made, poor agricultural households will be particularly worse-off within these two countries. Therefore, economic and agricultural policies in these two countries should pay more attention to agricultural sector growth (productivity) within their poverty reduction/eradication efforts.