Estimation of Total Factor Productivity Growth of Agriculture Sector in Pakistan

Abstract

Most important goal of development economics and macroeconomic policies is achieving sustainable production growth. Continuous production growth is considered to be important for raising living standards. Agriculture’s Total Factor Productivity (TFP) is one of the major sources of production growth. It assesses influence of the economic and technical efficiency in the production of the desired output by combining factor inputs. The study focused on estimating total factor productivity growth in Pakistan’s economy and particularly in the agriculture sector. For this purpose, the study utilizes the growth accounting technique to obtain reliable estimates of total factor productivity. The study covered total factor productivity growth period from 1973–2020. Results indicated that the overall economy average TFP growth rate is higher from 1981 to 1990 in the agriculture sector of the country. The TFP growth of agriculture sector was higher in this decade. Comparison between the TFP with other sectors like industrial and services, having 1.51%, 4.01% and 4.12%. TFP has been lowest in the agriculture sector as compared to other sectors as per findings of the study. As a result, effective policies are needed to enhance agriculture total factor productivity growth by the government. The farmers’ level of education makes a significant contribution to TFP development. It is concluded that education funding be increased for the farmers to accelerate TFP growth in Pakistan.