ICAR-IFPRI: Methodologies in Agricultural Extension Research capacity development program from September 21-24, 2015 in New Delhi

1. Total Factor Productivity:
Concept and Returns to
Research
Praduman kumar
Professor, IARI

2. • Total Factor Productivity
• Q=f(X1, X2, …..Xn)
• Q=f(x1t1, x2t2, ….xntn)
• Q=f(x,T)
• TG = QG-XG
• TFP Index = Output Index/Input index

3. Approaches for TFP measurement
• The parametric approach
• The accounting approach
• Non-parametric approach

4. The parametric approach
• Production function O =f(x,t)
• Cost function C=f(y,t)
• Partial differentiation with respect to time
gives technological change estimates

5. Production Function
• Estimate the production function for improved technology
• Estimate the production function for local technology
• Decompose the difference in yield between improved
and local technology and its sources.
• Sources of change are:
– Due to technology
– Due to change in inputs
» Labour
» Feed
– Estimate benefits (value of input saved under improved over
local technology)

6. Decomposition model
Y0
Y1
C
a
b
c
Fish input
Fish yield
X1X0
Y0 C = Yield gain due to improved
tech
C Y1 = Yield gain due to additional
inputs
Improved tech
Local
Tech

7. 0 0 0 0 0ln ln lnY DCP V   
1 1 1 1 1ln ln lnY DCP V   
 1 1 1
1 0 0 1
0 0 0
ln ln ln ln
Y DCP
DCP
Y DCP

  

      
         
      
%  in yield = %  in yield due to improved strain +
%  in yield due to additional inputs
Decomposition Model
Local strain
Improved strain

8. The Accounting Approach
• Divisia-Tornqvist Index is used
• Construct input index
• Construct output index
• TFP index = output index/input index
Ref Christensen, 1975

9. •Research,
• Extension,
• Education,
• Infrastructure,
• Health of natural
resources,
.....
Area Growth
TFP Growth
Input Growth
• Land
• Labour
• Fertilizer
• Irrigation
• Machine
• Seed
.
.
.
.
Yield Growth
Yield-Area
Decomposition
Input-TFP
Decomposition
•Input Prices,
• Output Price,
• Technology,
• Institutions,
• Infrastructure
.....

10. Data requirement for TFP
computation
• Quantity of output (commodity) produced
• Price of commodities
• Quantity of various inputs used
• Price of inputs

11. )Q/Q(=TOI/TOI
2/)R+R(
1jt-jtj1t-t
1
1jt-jt

Total Output Index (TOI)
Total Input Index (TOI)
/2)S+S( 1
1-itit
)x/x(=TII/TII 1it-iti1t-t 

12. Total Output Index
TOI (t) = TOI (1).TOI(2)………………TOI(t-1)
Total Input Index
TII (t) = TII (1).TII(2)………………TII(t-1).
Total Factor Productivity Index
TFPt = (TOIt / TIIt )

13. METHOD OF TFP
COMPUTATION of
fisheries.XLS

14. TFP EXAMPLE 1.xlsx

15. Trends in Rice TFP, All India
70
80
90
100
110
120
1301971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
Year
TFPindex

16. Growth in total factor productivity of
rice in India 1975 to 2005
Growth of Growth of Total factor
Region inputs output productivity
growth
Eastern 1.20 1.98 0.78
Western 2.37 2.54 -0.75
Northern 2.39 3.82 1.37
Southern 1.62 2.68 1.12
India 2.05 2.72 0.67

17. Annual growth in TFP and real
cost of production:1975-05
Crop TFP RCP
Rice 0.67 -1.01
Wheat 1.92 -2.28
Maize 1.39 -1.30
Jowar 0.63 -2.06
Bajra 1.04 -1.86
Barley 1.38 -2.07
Gram 0.16 -1.01
Arhar -0.69 -1.11
Moong 0.53 -0.90

18. Annual growth in TFP and real
cost of production:1975-05
Crop TFP RCP
Soybean 0.71 -0.84
Groundnut 0.77 -1.11
Rapeseed & Mustard 0.79 -1.99
Sugarcane 0.41 -0.36
Cotton 1.41 -1.62
Jute 1.28 -1.73

19. Sources of TFP
• TFP =f( Research, Extension, Markets, Balance
use of fertilizers, Sources of water, Rural
Literacy, Climatic factors)
• EVMP® = Elasticity of research stock*(Value of
output associated with TFP/Research stock)
• Generate benefit stream . Research benefit lag.
• Benefits will be 0.1EVMP, 0.2 EVMP,….
0.9EVMP, 0.8EVMP,……, 0.1EVMP
• Compute returns to research Investment

20. Impact
Assessment_Example.xlsx

21. Annual growth in TFP and real
cost of production:1975-05
Crop EVMP IRR
Rice 2.02 29
Wheat 4.03 38
Maize 1.85 28
Jowar 4.28 39
Bajra 2.29 31
Gram 2.84 34
Groundnut 0.71 18
R&M 0.89 20
Cotton 4.15 39

22. Contribution of research to
crop sector in India:2005-06
Particulars Value
Contribution of research to selected 9 crops (in
crore Rs)
1552
Share of the selected crops under study in value of
output (%)
41.4
Research contribution to total crop sectors based
on selected crops (in crore Rs)
3748
Research investment in the year 2005-05 (in crore
Rs)
2814
Returns to research investment (%) 33.2
IRR to Research investment 1985-86 to 2006-07 46.0%
1990-91 to 2006-07 42.0%

23. NCAP TFP POLICY PAPER 25

24. TFP _KL_IGP paper.pdf

25. ejdr201536a.pdf