An Application of the Extended Glass and McKillop Procedure for Computing TFP Growth to the Malaysian Rice Sector

Abstract

The objective of the present study is three-fold: to employ an aggregated data to investigate the total factor productivity (TFP) growth of the Malaysian rice sector; to investigate the sources of the TFP growth; and, to examine and extend the Glass and McKillop procedure for computing TFP growth. To this end, we establish several procedures which make it possible for us to: (i) link the TFP analysis with the theory of production; (ii) disentangle the sources of TFP growth into scale and technological change effects; and (iii) apply, compute, examine and extend the Glass and McKillop procedure for computing TFP growth.The finding of the study is as follows. (i) Using the standard procedure forcomputing TFP growth it was found that the average TFP growth for Malaysian rice farming was 1.37%, of which the scale effect contributed 0.29% and the remaining 1.08% was due to the technological change effect. (ii) Using the extended Glass and McKillop procedure, however, it was found that the average TFP growth, the technological change effect and the scale effect were 3.48%, 3.19% and 0.29%, respectively. (iii) Comparing these two results, derived from two different procedures, we concluded that the difference in magnitude of the TFP growth was due to the two distinct procedures for computing the technological change effect per se.