Total factor productivity growth in Pakistan's agriculture: 1960-1996

Abstract

Limits to further expansion of cultivated land and slowing returns to further input intensification accord a central role to productivity growth in meeting the challenges of agricultural growth in the future. There have not been many studies measuring total factor productivity growth in Pakistan's agriculture. The most frequently applied techniques for measuring total factor productivity growth in agriculture are: (a) Arithmetic Index (AI); and (b) Tornqvist-Theil Index (TTI). Total Factor Productivity in this study has been estimated using both the Arithmetic and the Tornqvist-Theil indexing methodologies. It has been shown that the Tornqvist-Theil indexing procedure is more appropriate due to dependence of results for the Arithmetic index on the weights used. The TFP index for the period 1960-96 is computed with a gross output index that includes both crops and livestock products and the aggregate input index that, in addition to land, capital, and labour, also includes purchased intermediate inputs (fertilisers and pesticides). The results show that the TFP has grown at an average annual rate of 2.3 percent for the entire period (1960-61 to 1995-96). This accounts for about 58 percent of the total output growth in the country during this period. It is fair to say that productivity growth was a significant driving force in the performance of the agriculture sector in Pakistan for over 36 years. The chief source of growth in TFP has been the technological progress embodied in the high-yielding varieties of grains and cotton with supporting public investment in irrigation, agricultural research and extension (R&E), and physical infrastructure. Sustaining and improving on this productivity performance of Pakistan's agriculture requires a strengthening and deepening of the agricultural markets and enhanced funding for the agricultural research system.