Measuring and Explaining Total Factor Productivity (TFP) Growth and Patterns in Philippine Agriculture: A Regional Panel Data Framework

The first part of the study attempts to estimate the Total Factor Productivity (TFP) growth in Philippine agriculture using the productivity measurement procedure proposed by Dumagan and Ball (2008). Employing the superlative Törnqvist index, their technique works directly with the observed nominal values of revenues, decomposing growth in revenues into output price and output quantity growth, and then decomposing the latter into input quantity growth and a residual term representing TFP growth. The second part investigates the determinants of agricultural productivity using the panel data analytic models such as the constant coefficients, the fixed effects, and the random effects model. Applying the technique to Philippine agriculture, the growth in output prices contributed on the average 7.55 percentage points (pct.pts.) to revenue growth of 10.71 percent for the entire period. This is significantly higher than the average contribution of the growth in output quantities of 3.16 pct. pts. For the output quantity decomposition, input quantities and TFP contributed 0.97 and 2.19 pct. pts., respectively. This reveals that output growth in Philippine agriculture has been mainly driven by productivity. The panel data analysis substantiates the importance of roads, rural electrification, and research and development to enhance agricultural productivity. Overall, this study recommends to examine further the role of output prices in determining farm incomes and undertake initiatives to boost agricultural productivity through investments in infrastructure and research and development.