Agricultural Productivity

The purpose of this section is to review both theoretical and empirical literature on agricultural productivity and efficiency of production. The section first provides description on the basic concepts and measurement of agricultural productivity. The second section provides the description on the basic concepts and measurement of efficiency of production. The third section describes the review of previous related empirical studies on agricultural productivity and efficiency of production.

2.3.1. Basic concepts and measurement of agricultural productivity

The microeconomics theory of production function has provided the basic framework for the definition and measurements of agricultural productivity. The definition of agricultural productivity

Three measures of productivity are frequently used depending on the number of inputs under consideration: Partial (single) Factor Productivity (PFP), Multi Factor Productivity (MFP), and Total Factor Productivity (TFP) methods (Zepeda, 2001). PFP method uses only single input and it measures the total output as a ratio of some inputs such as labor, land, capital, and any other intermediate inputs and it can be used in comparing the performance of firms. The most commonly used PFP measures are labor productivity and land productivity. Labor productivity is output per worker, while land productivity is output per area of land planted in a given plot. Although commonly used, the method ignores the role of other inputs in any observed output changes and hence misrepresents the performance of a firm. The attempts to overcome this short coming led to the development of MFP and TFP methods. These methods measure the total output quantity to a measure of the quantity of a subset of total inputs and, therefore, are more suitable for the performance measurement comparison across firms and for a given firm over time. MFP measures use joint effects of many factors including all inputs, new technologies, economies of scale, managerial skill, and changes in the organization agricultural production, all of which have an impact on the total output. TFP on the other hand, reflects only a measure of

This is possible if the farmer utilizes the existing inputs at farm level through raising the quantity of inputs. In older for the producer to increase inputs quantity either output price must increase or input price must fall or both. This source of productivity growth has little application in Ethiopia and other developing countries because, smallholder farmers, who account for the vast majority of farmers in these countries, often cannot afford these investments due to their limited resources and restricted access to credit. It is possible also to increase productivity by improving farm technology, such techniques is referred as transformation approach. According to this approach, agricultural productivity can be increased through utilization of better technology packages, such as use of HYV, use of fertilizers, and use of agrochemicals such as herbicides and pesticides, better farm management practices, and irrigation in areas where rainfall is inadequate. The application of such production technologies in the production process pushes the production frontier upward. It is also possible to increase agricultural productivity even given current levels, quality of inputs and available technologies through