Effects of oil prices agricultural land and employment on agricultural value added in Pakistan using the ARDL approach

Abstract

Pakistan's agricultural sector plays a fundamental role in ensuring food security, generating employment, and supporting economic growth; however, its performance is increasingly challenged by volatile international oil prices (OIL), changes in agricultural land (AL) use, and shifts in agricultural employment (AE). Despite the importance of these factors, limited empirical evidence exists on their combined long-run and short-run effects on agricultural value added (AVA) in Pakistan. Therefore, this study investigates the dynamic relationships among OIL, AL, AE, and AVA using annual data for the period 1990–2021 obtained from the World Development Indicators, the U.S. Energy Information Administration, and the Food and Agriculture Organization. The study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach after examining the stationarity properties of the variables using the Augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) unit root tests. The empirical findings confirm the existence of a stable long-run equilibrium relationship among the variables. AE has a positive and statistically significant long-run effect on AVA, whereas OIL and AL have statistically insignificant long-run effects. In the short run, increases in OIL significantly reduce AVA, while lagged changes in AE and AL significantly influence agricultural performance. The error-correction coefficient (− 0.843) indicates that approximately 84% of short-run disequilibrium is corrected within one year, demonstrating rapid convergence toward long-run equilibrium. These findings suggest that strengthening AE, promoting efficient resource utilization, and reducing the sector's vulnerability to energy price fluctuations are essential for enhancing agricultural performance and supporting sustainable agricultural development in Pakistan.