Logit and Probit estimation of the impact on the relative size of the agricultural sector in the face of variations in per capita income and index of economic freedom.

Abstract

In this work, it was proposed to answer the question: What is the relative size of the agricultural sector in a country in the face of improvements in economic freedom and the growth of the per-capita income of its inhabitants? Therefore, it was sought to estimate, probabilistically, the impact on the percentage of composition of agriculture in GDP (PAGP) in the face of marginal increases in the Index of Economic Freedom (IEF) and the Gross Domestic Product Per Capita (GDPbp); the methodology used was the estimation of econometric models for a limited dependent variable of the dichotomous form, specifically, Logit and Probit Models. For this estimation, PAGP was defined as a dependent variable, taking the value of one (1) countries with economies with PAGP greater than or equal to the median PAGP of all countries and zero (0) otherwise, IEF and GDPbp; were specified as independent variables. All data used are cross-sectional and correspond to the year 2018. The results obtained indicate that the unit variations of IEF and GDPbp generate a high probability that a country's PAGP is below the median PAGP of all countries, that is, as economic freedom and average income in a country increases, its agricultural sector has a high probability of losing relative weight in the economic composition of the country.