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Research Detail

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DAYAL TALUKDER
Lecturer
ICL Graduate Business School, Auckland, New Zealand

LOVE CHILE
Associate Professor
Auckland University of Technology, Auckland, New Zealand

The objective of this study was to assess the impact of technological innovation on the total factor productivity (TFP) growth of rice in Bangladesh during the post-liberalization era. The study used data from secondary sources and estimated the Data Envelopment Analysis (DEA)-based Malmquist productivity index for assessing the TFPgrowth. It also estimated the Cobb-Douglas (C-D) production function using the Ordinary Least Square (OLS) regression method for assessing determinants of rice output. The study found that agricultural trade liberalization positively influenced the TFP-growth of rice through technological innovation in the post-liberalization era. The increase in the TFPgrowth was driven by technological innovation – a cropping shift from local varieties to high-yielding varieties (HYV) of rice and reallocation of resources in favour of the HYVdominated Boro rice production. However, after the first decade, the TFP-growth gradually slowed down, which was attributed to the technological contraction or non-improvement and negative productivity of labour. The study suggests that the government should formulate policies to increase investment in research and development for technological innovation, and in human resource development through training and agricultural extension services for the efficient use of inputs to improve TFP-growth in rice production in the future. 

  Total factor productivity, TFP, Malmquist productivity index, Rice production, Post-liberalisation, Bangladesh
  In Bangladesh
  
  
  Food Safety and Security
  Rice, Product development

To examine the impact of technological innovation on the TFP growth of rice in the post-liberalization era with a view to suggesting a policy framework for the government to cope with the food security and food production issues in the future.

The study used annual time series data from secondary sources. The main source was the Handbook of Agricultural Statistics, December 2007 (Ministry Agriculture, 2007). Other sources include BBS (2007) and Bangladesh Economic Review (Ministry of Finance, 2009-2015). The study measured total factor productivity (TFP)-growth of rice. TFP-growth shows the relationship between the growth of output and the growth of input with the influence of technology and technical efficiency. It is generally calculated as a residual (Englander, 1988, p. 6; Hisali & Yawe, 2011, p. 14). Solow (1957) introduced the measurement of productivity growth and technical progress which was associated with a production function/cost function/profit function. For the TFP-growth measurement, economists developed many techniques such as index number approaches including the Malmquist productivity index (Caves, Christensen, & Diewert, 1982, p. 1394; Färe & Grosskopf, 1992, p. 158), Solow’s residual (Raa & Shestwova, 2006, p. 3; Solow, 1957, p. 312), Törnqvist productivity index (Caves, et al., 1982, p. 1394), and Fisher ideal index (Färe & Grosskopf, 1992, p. 158); stochastic production frontier estimation techniques (Sharma, Sylwester, & Margono, 2007, p. 218); Monte Carlo simulation techniques (Slade, 1986, p. 76); translog production function (T. Chang & Hu, 2010, p. 3263); growth accounting matrix (Griliches, 1996, p. 1324); and Durenberger productivity indicator (Barros, Guironnet, & Peypoch, 2011, p. 642). Both mathematical and econometric models are used to measure TFP-growth. Using mathematical models, there are four main approaches to the measurement of TFP-growth namely: (a) Solow’s residual analysis, (b) the index number approach, (c) input-output analysis, and (d) Data Envelopment Analysis (DEA) (Raa & Shestwova, 2006, p. 1). The Malmquist productivity index is a widely-used index number approach because it is simple to measure, easy to understand, and produces reliable results. It provides high accuracy, has minimum restrictions for model specification, and is easy to decompose into two major components: technical efficiency change, and technological change – the main sources of TFP-growth. Similarly, the DEA method is a commonly used technique for the measurement of TFP-growth. The main advantage of using the DEA method is that it avoids model misspecification (Cook & Zhu, 2005, p. 1). This is a scale-neutral method using the measurement of inputs and outputs based on linear programming techniques. (T. Chang & Hu, 2010, p. 3263). This study used the DEA method to calculate the Malmquist productivity index (TFP) with a view to identifying sources of productivity growth and efficiency in rice production. The advantage of the DEA-based Malmquist productivity index is that it calculates the efficiency of factors or inputs. The output-oriented factor-efficiency measures the maximum output from a given input. Similarly, input-oriented efficiency measures the use of minimum input to produce a given output. It is related to returns to scale such as increasing, constant, and decreasing return to scale. The successive production sets are essentially independent from each other. However, there is a certain form of dependence between sequential production sets across time. This dependence is based on the assumption that production units can always produce the same amount of outputs given the same amount of inputs that they have done before in the production processes (Färe & Grosskopf, 1992, p. 159; Färe, et al., 1994, p. 68; Yuk-Shing, 1998, p. 7). Thus, the construction of the latest set requires information on the previous period’s inputs and outputs for measuring productivity performance.  

  Journal of Economic Literature (JEL), classification code: C63, F14, O47
  https://www.researchgate.net/publication/332934151
Funding Source:
1.   Budget:  
  

The above findings and analyses suggest that agricultural trade liberalization positively influenced the productivity of rice as a result of technological transformation in rice production. The economy experienced an increase in TFP-growth driven by technological change in the post-liberalization era. The TFP-growth is a multiplicative impact of technical efficiency change and technological change generated from the efficient use of inputs and an outward shift in production possibility frontier respectively. The improvement in the productivity of rice contributed to a higher volume of rice output. The increase in productivity and total output was driven by cropping shifts from local varieties to the HYV rice and the reallocation of resources in favour of the HYV-dominated Boro rice in the post-liberalisation era. The use of irrigation, fertilisers, pesticides, and HYV seeds increased in the post-liberalisation era because of lower input prices, resulting from agricultural trade liberalisation. The study found that the impact of technological change on the TFP-growth gradually slowed down after the first decade of high growth in the productivity of rice. This slow-down in TFP-growth might be attributed to technological non-progress as technology gradually becomes obsolete after its adoption if innovation and research and development (R&D) are not sufficient to replace the old technology. The study suggests that R&D development activities are required to strengthen technological innovation for improving technological change in rice production to achieve and sustain higher TFP-growth in the future. Similarly, there is a huge amount of excess labour employed in rice production. This excess labour may be reallocated to other sectors for increasing productivity of labour in rice output and will contribute to higher household income from economic activities other than rice production. The intensive and efficient use of factors is crucial for increasing technical efficiency in rice production that will contribute to the total factor productivity growth as well. Therefore, the study suggests that the government should formulate policies to increase investment in (1) research and development for technological innovation, and (2) in human resource development through training and extension services for efficient use of inputs to improve TFP-growth in rice production. This policy would enhance food production for a large population and ensure food security and macroeconomic price stability that might come from high food prices. 

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