Six Decades of Total Factor Productivity Change and Sources of Growth in Bangladesh Agriculture (1948–2008)

Abstract

This study applies the Färe–Primont index to calculate total factor productivity (TFP) indices for agriculture in 17 regions of Bangladesh covering a 61-year period (1948–2008). It decomposes the TFP index into six finer components (technical change, technical-, scale- and mix-efficiency changes, residual scale- and residual mix-efficiency changes). Results reveal that TFP grew at an average rate of 0.57% p.a. led by the Chittagong, Rajshahi, Rangpur, Dinajpur and Noakhali regions. TFP growth is largely powered by technological progress estimated at 0.74% p.a. Technical efficiency improvement is negligible (0.01% p.a.) due to stagnant efficiency in most of the regions. Decline in scale efficiency is also negligible (0.01% p.a.), but the decline in mix efficiency is high at 0.19% p.a. Decomposition of the components of TFP changes into finer measures of efficiency corrects the existing literature’s blame of a decline in technical efficiency as the main cause of poor TFP growth in Bangladesh. Among the sources, farm size, R&D investment, extension expenditure and crop specialisation positively influenced TFP growth, whereas the literacy rate had a negative influence on growth. Policy implications include encouraging investment in R&D and extension, land reform measures to increase average farm size, promotion of Green Revolution technology and crop diversification.