| In Pakistan, given the size of the agriculture sector, and its strong linkages with the rest of the economy, the growth in GDP has been affected greatly by agricultural growth. Generally, periods of flourishing agriculture have been associated with robust overall economic performance and vice versa. While agriculture has grown impressively at an average annual rate about 4% since the early 1960s, sustaining this performance in the future is essential for meeting the demand for food and raw material by a rapidly growing population and expanding industry. In the face of approaching limits to further expansion of cultivated area and intensified use of inputs, much of the future agricultural growth has to come from increased farm productivity.;In this thesis, we estimate total factor productivity (TFP) for the agriculture sector to study the underlying sources of productivity growth from 1960 to 1996. We have used two approaches to measure TFP. In the first approach, the estimates show that TFP has grown at an average annual rate of 2.3% for the entire period with 58% of the total output growth attributable to productivity. While the productivity gains in the 1980s and 1990s were much lower than the remarkable growth experienced in the early Green Revolution years (1965–70), they still reflect a fairly robust performance by agriculture. Since 1985, TFP growth has been sustained at an average annual rate of 2.4%.;In the second approach, we have used a Cobb-Douglas production function for the agriculture sector. Mixed estimation was used with prior information on input coefficients incorporated in the estimation procedure as linear stochastic restrictions. The estimated rate of growth of neutral technological growth was reasonably close to the productivity growth rate estimated with the first approach.;It is widely acknowledged that productivity growth in agriculture is largely driven by technological change. Technological change, in turn, is a product largely of investment in agricultural research and extension services. In most contexts, agricultural research and extension (RE) investments have generally yielded rates of return far higher than in alternative investment opportunities. In this thesis, we study the impact of RE investment on TFP growth in Pakistan's agriculture within a distributed lag framework. The estimated results indicate that the RE expenditures, with total impact distributed over 16 years, explain 96% of the variation in the TFP index. Using the standard methodology, the marginal internal rate of return on research and investment is estimated at 88%, which is in the range reported for other countries. Based on this evidence, a strong argument can be made for enhancing allocation of public resources to RE both on grounds of economic efficiency in the resource allocation and its significant relationship to TFP growth in agriculture. |
