Productivity growth: Bahrain agriculture and fisheries sector

Abstract

The main objective of this study is to measure and analyze one of the major components of economic performance, multifactor productivity (MFP) growth rate (technological change) adjusted for economies of scale, and to measure and analyze the growth rate partial (input-specific) productivity in Bahrain Agricultural and Fishery Sector (Primary Sector) over the time period 1980-2002. A dual cost measure of multifactor productivity growth was developed to obtain a highly interpretable measure of economic performance. Exploiting recent developments in dual cost theory, a well-defined method for empirical estimation has been established. This approach explicitly takes into account the impacts of non-neutral technological change and economies of scale that may occur in the long-run production process. An empirical model of multifactor productivity was derived as an application of this dual-cost analysis. The translog long-run cost function was employed to estimate the multifactor productivity growth, technological change, the bias of the technological change, and input-specific (partial) productivity in Bahrain primary sector. The findings of this study show that the presently structured primary sector, in general, have experienced a relatively low productivity growth rate, an annual average of 1.7%. The reasons behind this low performance could be the presence of a number of sub-optimal operations with significant low rate of multifactor productivity growth. However, the maximum level of multifactor productivity growth rate was 17.5% in 1994, just before the civil unrest era in Bahrain. It is important not only to measure and to analyze the level of multifactor productivity growth at the industry level, but also at the firm (plant) level in order to draw the appropriate policy regarding the new investments and identifying the relative importance of different types of investments that should be encouraged. Avoiding any misinterpretation of the current economic performance of Bahrain primary sector, the study also recommends, a comparison with that of its challengers among the GCC countries. Therefore, the study calls for further research at disaggregated levels of the industry with emphasis on the decomposition of MFP to identify its main factors that contribute to its rate of growth. Such further research would give policy makers a better vision and know-how to initiate policies that could enhance the productivity growth rate and its major components, thus pressing forward to stronger competitive position in the GCC region.