Comparisons of agricultural productivity growth in China and India

Abstract

We measure and compare agricultural total factor productivity (TFP) growth and its components (efficiency and technical change) in China and India and test the TFP series for the existence of structural breaks relating the evolution of TFP to policy milestones. Our results show that agricultural TFP growth accelerates in China after 1979 and in India after 1974, although China’s agricultural sector clearly outperforms India’s. The main explanation of these differentials is that agricultural growth in China benefited from more fundamental institutional and policy reforms in agriculture than India. There is some evidence that the transformation of industry in China was also important for agricultural TFP growth. Manufacture growth absorbed labor and reduced employment in agriculture, creating incentives for capital investment and technical change that kept output per worker in agriculture growing at high rates. Fewer changes in agricultural policies and in the dynamics of manufacturing in India resulted in slower growth in agricultural productivity, despite policy changes that accelerated economic growth in recent years.