GROWTH ACCOUNTING FOR SRI LANKA'S AGRICULTURE WITH SPECIAL REFERENCE TO FERTILIZER AND NONAGRICULTURAL PRICES: DO POLICY REFORMS AFFECT AGRICULTURAL DEVELOPMENT?

The agricultural sector of Sri Lanka reacted sharply to the highly contentious policy reforms called Structural Adjustment Programs. We used a four‐sector general equilibrium model under a growth accounting approach to find out the effect of the policy (exogenous) variable on the target (endogenous) variable. Here, we considered only the most important variables, and the overall results indicate that policy changes are favorable to overall agricultural development, although their effect on the domestic food sector is negative. The most serious negative determinant under the policy changes relates to fertilizer, and our study indicates that fertilizer prices considerably affect agricultural production; it especially has a negative effect on domestic food production. Second, this paper analyzes the impact of nonagricultural price, finding that it positively helped the development of overall agriculture. Third, agricultural exports increased under the new policy reforms and made large contributions to agricultural production.