Accounting for TFP Growth in Global Agriculture - a Common-Factor-Approach-Based TFP Estimation

Abstract

There is no consensus about trends in agricultural productivity among agricultural economists. The aim of this paper is to contribute to the investigation of this issue by estimating a Total Factor Productivity (TFP) index for global agriculture and global agricultural regions. One of the biggest challenges with analysing global productivity trends is the lack of price data or cost shares, especially in developing countries. We apply recently introduced econometric models that permit accounting for technology heterogeneity and the time-series properties of data to estimate cost shares. Aggregate sectoral data from the USDA ERS database are investigated for the period 1990 to 2013. Although we used a different method, our results are in line with earlier findings that used USDA or FAO database. TFP growth has accelerated in world agriculture, largely due to better performance in transition countries. Although TFP growth has accelerated in world agriculture, it has slowed down in industrialized countries. TFP growth in the EU has increased, but at slower rate in recent years. In the Old Member States the growth rate has decreased, whereas in the New Member States it has increased. The results highlight that insufficient spending on productivity-enhancing agricultural R&D in industrialized countries may put future agricultural productivity growth at risk.