Decomposition of Total Factor Productivity of Cash Crops in Pakistan: A Malmquist Data Envelop Analysis

Abstract

This paper examined the total factor productivity of cash crops in Pakistan from 1980 to 2018. It uses Malmquist productivity index by applying data envelop analysis to estimate the changes in the production frontier. The Malmquist productivity index is used to decompose total factor productivity into technical change (TECCH) & technical efficiency change (EFFCH). Technical change (TECHCH) means shifts in the frontier or innovation, while efficiency change means catching up to the frontier. The Empirical results show an increase in the productivity of the cash crop in Pakistan. The objective of the study is the decomposition of the total factor productivity of cash crops in Pakistan. Three cash crops (sugarcane, cotton, and rice) and seven inputs (arable land, irrigated land, use of electricity, use of petroleum product, education, credit facility, and machinery) have been used. The study found a 2.2% increase in total factor productivity of cash crops in Pakistan which was mainly due to technological change, and the efficiency score of cash crops in Pakistan has been decreased relative to previous years, which is 8.40% in the period’s t+1, and compared to 10.44% in the period’s t. The government should invest in research and extension in order to provide better seed varieties, better infrastructure, and ensure credit facilities.