R,d&e: Implications To Tfp

R,D&E: Implications to TFP SRFrancisco, MJMariano, RDAcda,ATCastaneda

Rationale 

TFP is an important indicator in measuring the productivity of the economy… it is basically the residual source of growth after accounting for the contribution of the different factors of prodn such as labor & capital… captures the contribution of technological advances and of other factors that improve the overall efficiency of the economy

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Several studies have analyzed the agricultural TFP in developing countries (Hayami and Ruttan 1970; Kawagoe, et al 1985; Kawagoe, and Hayami 1985, Thomas, and Wang 1996; Trueblood 1996; Fulginiti, and Perrin 1993, 1997, and 1998; Nin, et al 2003; Rao and Coelli 2003) found that agriculture in most of developing countries including the Philippines experienced technical regression from 1960 to 1980.

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low productivity performance has been attributed by some to economic policy…other possible factors maybe environmental degradation such as depletion of soil micronutrients arising from land-use intensification (Nin, et al 2003; Umetsu, et al 2003; Bouis 1993; Pingali, 1992).

Objectives  

Determine the trends in TFP through time Determine the effects of public investments in RD&E on TFP growth in agriculture

Methodology … as long as data permits, a comparison of different methods will be used to see how robust productivity growth estimates are with respect to varying estimation methods…the extent of data availability will constraint the scope of analysis… remedies the foreseen inadequacy of data will be explored

Methodology TFP computation 

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Index numbers – depending on the assumed functional generator Non-parametric-LP, DEA… Parametric-Cobb douglas, Translog…

Explaining variations in TFP If TFP is seen as important engine of growth, then there is a need to explain its sources…TFP components include improvement in efficiency, technological change, and scale effect….it is important to determine the factors affecting these three components… of the particular interests is the impact of R,D&E on TFP in agriculture…rice as a case study

Explaining variations in TFP R&D– the role of R&D in agricultural productivity was already well established (Antle 1983; Binswanger et al 1987; Griliches 1994; Fulginiti and Perrin 1993; Craig et al 1997). Ruttan (2002) noted that the extent to which technical change in agriculture will be endogenous depends on how science and technology will sustain and enhance the productivity of factors that are relatively scarce or expensive.

Explaining variations in TFP Extension – effective agricultural extension can bridge the knowledge gap between discoveries in laboratories and changes in the individual farmer’s field (Birkhauser et al. 1991). Extension services not only helps in increasing productivity by diffusion of information about cropping techniques, optimal input-use, high yielding varieties but also aids in improving the managerial skills of farmers. While it conveys flow of information from researchers to farmers, it also provides a feedback mechanism from farmers to researchers.

Other factors Human capital, rural infrastructure, irrigation, credit, population pressure, prices,

Sources of variation in TFP Approaches of determining the influence of R,D&E on TFP… 

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direct incorporation of variables measuring R,D & E activities into the production function estimation (Griliches 1964; Evenson 1967) or to its dual cost function (Huffman and Evenson 1989). two-stage decomposition wherein productivity index is first estimated and then regressed on R,D&E and other variables to explain productivity growth (Rosegrant and Evenson 1992; Fulginiti and Perrin 1993; Pardey and Craig 1997).

Methodology Explaining variations in TFP

Where TFP = index using appropriate index number RES = real R,D & E expenditures T = time trend D1 = dummy variable to capture influence of weather during the time period

Expected outputs Full report on the nature and sources of productivity growth in agriculture in the Philippines in terms of research and development and extension investments.  

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A report on current state-of-the-art methodology in TFP measurement; A survey of literature of TFP of Philippine Agriculture and comparison with other countries; Dataset for TFP measurement that can be used for future long term TFP assessment; A report on comparison of approaches in measuring TFP; A paper on Trends of Total Factor Productivity Growth in agriculture in the Philippines that showcase national and regional performance that is ready for journal publication; Dataset of productivity-enhancing public expenditures that can be used for future impact research and welfare evaluations;

Expected outputs… Specific interest to PhilRice… a case study  A report on estimates of elasticity various policy instruments on rice TFP which can be used for future impact research and welfare evaluation;  A paper on Determinants of Rice TFP Growth in the Philippines (Answers how much government policies like expenditure in research, extension, etc. improves productivity and thereby contribute to national production and supply of rice)

Technical Issues 

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How can we integrate the contribution of IR center like IRRI to the analysis? Shall we take it as given or do we need to incorporate their expenses in development of technologies? The issue of budget allocation...do we intend to look at expenditure efficiency? account for this in the analysis? Spillover effects Issue of extension being devolved

Method Issues We intend to use the rice statistics to derive TFP...however, a look at the rice stat, suggests that there is very limited info and wont allow to compute TFP… Inputs in production are the problem when you use our rice stat… possible solution is to derive the inputs from our RBFHS. We will do the same for the whole agriculture

Proposed remedies Accounting for the IR centers contribution…in order to

understand the effect of research on productivity we must first understand how research produces technology information, and knowledge. This can be done by modeling a “knowledge production function” as follows: Pj  f  S j , E j 

Where  Pj – index of total knowledge generated (in terms of publications, technology developed, etc)  Sj – Scientists’ man-year in agricultural research  Ej – Vector of expenditure on agricultural research (operating expenses, capital outlay, and international grants, all adjusted to 2000 constant prices)

Proposed remedies… Spillover effects-The spillover effects of international research expenditure can be accounted for and incorporated…previous eqn. This can be done by specifically including the international funds spent on production ecosystems that are present in the country. Basic research of these international organization, however, will be treated as a given…The created technological variable could then be incorporated in the productivity equations… in a lag manner as its effects would not be immediate due to adoption decision.

Proposed remedies…

Issue of extension being devolved… Agricultural extension service in the Philippines was devolved to local government in 1991. Ideally, all extension expenditures including those from local and national government should be included in the study… hard to track for extension expenditure in each local government unit…adjusted to constant 2000 prices

Accomplishments/future plans Accomplishments   

Finalization of proposal Conduct of literature review Extent of data availability

Future plans   

Data gathering Analysis Report preparation

End of Presentation