The search for policies and tools that benefit the economic growth of countries has been the subject of study for several decades. In this matter, the role of the agricultural sector, as well as the importance of non-agricultural sectors has been the subject of debate and research all over the world. Many countries, especially developing countries base their economy on the production and export of primary products, having an incipient manufacturing sector. Many economists and theorists claim that the development of non-agricultural sectors is essential and are a requirement for the economic growth of countries, and that they should move their policies away from the agricultural sector in order to boost growth. Other theories state that the development of the non-agricultural sector must be financed through higher taxes to the agricultural sector, in order to transfer the resources of this sector. The debate is still going, especially in Paraguay, which has an economy with great dependence on the agricultural sector.
This study constitutes the first approach to investigate the relation of the agricultural sector and the economic growth of Paraguay. The study examines the relationship between agricultural GDP and total GDP, tax rates and GDP, tax rates and agricultural GDP, and agricultural GDP and non-agricultural GDP. The study uses quarterly secondary data from Paraguay from 1995 to 2017, totalizing 92 samples.
The results of this research confirm the positive impact of the agricultural sector on the economic growth, the positive impact of the agricultural sector on the non-agricultural sectors, the negative impact of agricultural tax rates on the agricultural GDP, and the negative impact of tax rates on the total GDP.

TABLE OF CONTENTS I
LIST OF FIGURES III
LIST OF TABLES IV
CHAPTER ONE INTRODUCTION 1
1.1 Research Motivation 1
1.2 Research Background 2
1.2.1 Gross Domestic Product of Paraguay 2
1.2.2 Sectorial Economy of Paraguay 3
1.2.3 Key Exporting Goods of Paraguay 6
1.2.4 Growth and Development Indicators of Paraguay 9
1.3 Research Objective 14
1.4 Research Procedure 14
1.5 Structure of This Study 15
CHAPTER TWO LITERATURE REVIEW 17
2.1 Overview 17
2.2 Economic Growth 19
2.3 Economic Distortions 22
2.3.1 Taxes 24
2.3.2 Subsides and Relative Prices 26
2.4 Inter-Sectorial Transfers of Resources 30
CHAPTER THREE METHODOLOGY 34
3.1 The Concept of Research Model 34
3.1.1 Independent Variables 36
3.1.2 Dependent Variable 37
3.1.3 Control Variables 37
3.2 Methodology 40
3.2.1 Multiple Linear Regression Model 40
3.2.2 Ordinary Least Squares Method 40
3.3 Hypotheses of Study 41
3.4 Data Collection Process 46
3.5 Data Analysis 47
CHAPTER FOUR RESULTS AND FINDINGS 49
4.1 Descriptive Statistics and Correlation Analysis 49
4.2 Hypotheses Testing 50
4.2.1 Hypothesis 1 50
4.2.2 Hypothesis 2 52
4.2.3 Hypothesis 3 54
4.2.4 Hypothesis 4 56
CHAPTER FIVE CONCLUSION AND RECOMMENDATIONS 59
5.1 Summary 59
5.2 Contribution 60
5.3 Limitations 61
5.4 Recommendations 61
5.4.1 Recommendations for Practice 62
5.4.2 Recommendations for Future Studies 64
5.5 Conclusion 65
REFERENCES 66
APPENDIX 71
SPSS Results for H1 71
SPSS Results for H2 73
SPSS Results for H3 75
SPSS Results for H4 77

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