THE DETERMINANTS OF TOTAL FACTOR PRODUCTIVITY IN GHANAIAN AGRICULTURE

Abstract

The role of productivity in general and agricultural productivity in particular in hastening the pace of economic growth cannot be underestimated. There is an ever rising need for increases in food supply, given the incessant increases in population and a dwindling supply of farmland that can only emanate from growth in productivity rather than increases in input usage. The study examined the total factor productivity measure and the factors influencing it in Ghanaian agriculture by employing an annual time-series data at the national level over the period 1961-2014 for both crops and livestock, aggregated. Total Factor Productivity (TFP) was estimated using the Solow index technique of the conventional growth accounting method. The ARDL Bounds cointegration test was used to establish the existence of a long run relationship between the variables. The Stock-Watson’s Dynamic Ordinary Least Squares (DOLS) model was employed, with the measured TFP Growth, in investigating the effect of different macroeconomic and climatic variables on the growth of agricultural Total Factor Productivity Growth (TFPG). Total factor productivity of Ghanaian agriculture grew at -3.71% over the entire study period with an annual growth rate of -0.07%. The DOLS results indicated that human capital, infrastructural development, trade openness and rainfall positively and significantly impacted on TFPG. However, Per capita income, inflation and the exchange rate significantly impacted TFP growth negatively. In effect, the results showed that policies which advance human capital development, ensure price stability, facilitate trade openness, improve infrastructural development, promote exchange rate stability and drought controlling factors; would result in a higher agricultural productivity growth in Ghana.