Macro Determinants of Total Factor Productivity Growth of Agriculture in Pakistan

The role of productivity in accelerating the pace of economic growth is well recognized in the literature. With continual population growth, a diminishing supply of arable land, limits to further expansion of cultivated land and slowing returns to further input intensification, there is a growing need for productivity growth to expand food supply. The present study investigated the impact of different macro variables on Total Factor Productivity (TFP) of agriculture in Pakistan by employing cointegration analysis for the period from 1971 to 2006. The results indicated that human capital, infrastructure development and credit resources are positively associated with TFP of agriculture. Openness of the agricultural economy had a significant positive impact on productivity. Macroeconomic instability influenced TFP growth negatively and significantly. Real per capita income had a positive but insignificant relationship with productivity growth. Strong two way Granger-causality was observed between productivity and human capital development; and infrastructural development. Overall the results implied that policies which promote human capital, increase credit resources in agriculture, improve infrastructure development, facilitate openness of the agricultural economy, will improve the productivity and competitiveness of Pakistan agriculture