1. Agricultural Productivity Growth and
Implications for GTP
Fantu Nisrane Bachewe and Alemayehu Seyoum Taffesse
IFPRI ESSP-II
Improved evidence towards better food and agricultural
policies in Ethiopia
November 02, 2012
Hilton Hotel, Addis Ababa
1

2. Introduction
Objective:
 Lessons on sources of recent growth in output ; and
 Promote a discussion on their implication for GTP.
Outline:
 Motivation: Recent trends in output and yield, and
sources of growth,
 Trends in total factor productivity and implications,
 Challenges of increasing TFP and efficiency.
11/5/2012 2

3. Summary
 Output growth in the recent past was mainly driven by growth in
cultivated area and traditional inputs such as labor and livestock;
 Yield growth is getting more important as a source of output growth;
 Modern inputs have yet to contribute as much as expected to
increases in output, and
 Positive contributions of increased advisory services by extension
agents.
 Future growth need to derive from increases in TFP.

4. Data and Methods
 Data
 Ethiopian Central Statistical Agency (CSA)
 Annual Agricultural Sample Survey (2005/6-2011/12)
• In 2011/12 entire rural parts of the country covered, except 9 zones
 MoFED:
 National accounts data for 2005/6-2009/10;
 Production and input use projections for 2009/10-2014/15 (GTP)
 EDRI Social Accounting Matrix (SAM) of 2005/6
 Methods
 Growth decomposition;
 Growth accounting

5. Recent Trends in Output, Area, and Yield: CSA Data
 Total agricultural and grains output, area, and yields data
from CSA for 2005/6-2011/12 used in this section;
 We decompose output growth into area and yields growth
 Output growth is decomposed as:
Output = Change in + Change in
change cultivated area yields
5

6. Recent Trends in Output , Area, and Yield: CSA Data
 Grains constitute the single most important crop category;
Figure 1: Average annual contribution of growth in area and yields for
growth in grains output.
2005/6-2009/10 2009/10-2011/12
25%
40%
58%
73%
Grains area Grains yields Grains area Grains yields
6

7. Recent Trends: Sources of Growth
Other methods than output decomposition needed to:
 Identify sources of growth in yields
 Get weighted contributions of factors;
 Growth in factors of production weighted by factor shares;
Growth accounting takes both into account and involves:
Total Change output Change output Change in
output = in * share + in * share + … + total factor
change area of area labor of labor productivity
Where the dots (…) stand for changes in other inputs.
7

8. Recent Trends: Sources of Growth
 Annual changes in total factor productivity (TFP) are then
calculated as:
Technological Progress
Change in Output
Change in Technical
less Efficiency
Change in TFP
Weighted Change in
Change in Other Factors
Input Use (Scale Effects, Price
Effects)

9. Recent Trends: Sources of Growth
 The growth accounting analysis was applied on data:
 From MoFED, CSA, and factor shares from 2005/6 EDRI
SAM;
 Covering the 2004/5-2009/10 period
 National accounts data from MoFED show;
 Real value of output grew at average annual rate of 8.4
percent during the period;
 Results of the analysis indicate that:
9

10. Recent Trends : Sources of Growth
Figure 3: Average annual contribution of factors of production and TFP for
growth in real value of output.
Cultivated
area, 6%
TFP, 47% Labor, 32%
Capital, 6%
Others , 4% Fertilizer, 5%

11. Recent Trends in total factor productivity
 Annual change in TFP averaged 3.9 percent;
 Cumulative TFP level was 20 % larger in 2009/10 than in
2004/5
 Other methods applied on zone level data find similar trends
of changes in TFP;
 Insights provided by these methods and data include;
 Zonal efficiency averaged 72 percent during the period; and
 Improvements in efficiency contributed for growth in output.

12. Some Implications
 MoFED (2010) projects grains output, area, and yields for
the 2010/11-2014/15 period in its GTP Policy Matrix;
 Grains output is expected to grow at an average annual rate
of 7 percent;
 Grains area projected to grow at average annual rate of
1.6 percent and yields at 5.3 percent;
 Decomposition of the projected output into area and yields
indicates:
 Cultivated area will on average contribute 24 percent;
 Growth in yields projected to contribute 74 percent.
12

13. Some Implications
 We also conducted a growth accounting analysis
 Two scenarios were considered for the analysis:
1. Projected grains output and inputs in the GTP Policy Matrix;
 Average annual change in TFP of 3.4 percent required;
2. Grains output projected by the Agricultural Transformation
Agency (ATA) together with input use projections in the GTP;
 Average annual change in TFP of 13.4 percent required;
 The scenarios imply large changes in TFP required in last 3
years of GTP
13

14. Figure 5: Average annual contribution of growth in inputs and TFP for
growth in grains output, 2009/10-2014/15.
GTP Projections ATA Projections
Area, Area,
3% 1% Capital,
3%
Labor, Fertilize
12% r, 2%
TFP, Labor,
42% 30%
Capital, TFP,
9% 77%
Impr. Impr.
seeds, Fertilize seeds,
6% r, 6% 2%
14

15. Summary
 Output growth in recent past was mainly driven by growth in
cultivated area and traditional inputs such as labor and livestock;
 Yield growth is getting more important as a source of output growth;
 Modern inputs have yet to contribute as much as expected to
increases in output, and
 CSA data imply positive contributions of increased advisory services
by extension agents.
 Future growth need to derive from increases in TFP.

16. Challenges of Increasing TFP
 Is there potential to improve efficiency?
 Zonal analysis – limited room (0.72 but higher if the region with the
lowest TE is excluded);
 Caveat:
 Concept “… farm-level efficiency concept has been applied to zone-level data.”
 Adoption - The returns question (VC ratios <2);
 Input subsidy - a sub-text
 Reduced transaction costs
 Availability –
 The Seed question;
 Mechanization.

17. Thank you for your attention.
Comments welcome.
17

18. Table 2--Annual growth rates in crop output, inputs, and total
factor productivity, in percent, based on three-year moving
average.
Period
Growth 1957-67 1967-76 1976-86 1957-86
Output 2.18 2.68 2.07 2.225
Input 1.08 1.28 1 1.11
TFP 1.1 1.39 1.05 1.13
Source: Table 2: Rosegrant and Evenson (1995)
18

19. Table 4. Growth Rate of Output, Input, and TFP indices by Cropping
systems
Area Growth rates
Indian Punjab Output Input TFP
wheat-Rice 5.1 3.7 1.4
wheat-Cotton 5 2.5 2.5
wheat-Maize 3.6 1.2 2.4
Pakistan Punjab
wheat-Rice 2.4 2.3 0.1
wheat-Cotton 4.1 2.1 1.9
wheat-Mung bean 4.3 2.3 2
wheat-Maize 2.6 1.6 1
Source: Murgai, Ali, and Byerlee (2001).
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20. Recent Trends in Output, Area, and Yield: CSA Data
Decomposition of output growth indicates that during
2005/6-2009/10:
 Average annual growth in total agricultural output was 7.5
percent;
 Growth in cultivated area accounted for 42 percent of the
growth in output;
Similarly, during 2009/10-2012:
 Total output growth averaged 9.4 percent per year;
 Growth in cultivated area accounted for 27 percent of the
output growth.
20

21. Recent Trends in Output and Yield: CSA data
Decomposition of grains output indicates during 2005/6-
2009/10
 Growth in grains output averaged 7.8 percent
 Growth in area under grains accounted for 40 percent of the
growth;
 Grains yields growth accounted for 58 percent of output growth;
During 2005/6-2009/10:
 Grains output growth averaged 10 percent;
 Growth in area sown to grains contributed 25 percent;
 Grains yields accounted for 73 percent of the growth in output.
21

22. Some Implications
Figure 4: Projected growth rates in grains output, area, and yields, 2009-10-2014/15 .
10.0
9.0
Annual growth rate in percent
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
09/10-10/11 10/11-11/12 11/12-12/13 12/13-13/14 13/14-14/15
Output Cultivated area Yields
22

23. Figure 2: Annual contribution of growth in area and yields for growth in grains
output, 2005/6-2011/12.
80% 76%
70% 68%
64%
62%
60%
Contribution in percent
51% 52%
50% 47% 47%
40% 35% 35%
30%
30%
22%
20%
10%
0%
05/06-06/07 06/07-07/08 07/08-08/09 08/09-09/10 09/10-10/11 10/11-11/12
Grains area Grains yields 23

24. Recent Trends - Sources of Growth : CSA data
A SFA applied on zone level CSA data indicates:
 Total output grew 8.6 percent in an average year,
 About 42 percent of the increase in output resulted from
increases in cultivated area;
 Growth in number of holders averaged 3 percent and
accounted for 7 percent of the output growth,
 Changes in TFP accounted for 50.5 % of output growth;
 Number of draught livestock, which constitute non-land
capital, grew at average annual rate of 5.5 % it did not
significantly affect output.

25. Recent Trends - Sources of Growth: CSA Data
Growth in application of modern inputs was not rapid :
 On average 44 percent of cultivated area was fertilized and
this share grew at average annual rate of 1 percent,
 Chemical fertilizer application rate averaged 33 KG/ha
and grew annually at a rate of 6.8 percent,
 Area under improved seeds averaged 3.5 % and grew at
5.7 %,
Modern input application was not responsible for
considerable growth in output.

26. Recent Trends: Sources of Growth
 Other methods than output decomposition required to identify
sources of growth in yields
 One such method is Growth Accounting
 A growth accounting analysis involves
Total Sum of Change in
change = changes in + total factor
in output inputs i productivity
Where i is cultivated area, labor, fertilizer, and other inputs used
in production
26

27. Some Implications
Table 3: Annual changes in TFP and GTP Targets (percent).
Scenario considered
GTP in MoFED Actual CSA ATA version
Period (2010) and GTPa of GTPb
2009/10-2010/11 0.5 3.6 8.5
2010/11-2011/12 0.9 4.4 8.8
2011/12-2012/13 4.8 4.8 14.3
2012/13-2013/14 5.0 5.0 17.4
2013/14-2014/15 5.6 5.6 17.9
Average annual change in TFP 3.4 4.7 13.4
Cumulative level of TFP in 2014/15
relative to 2009/10 116.9 123.4 167.0
Notes: a) Growth rate of GTP for 2011/12 onwards used. b) Output growth rate proportional to
original GTP assumed.