The total factor productivity in China and India: new measures and approaches

Abstract

PurposeThis paper aims to measure and compare agricultural total factor productivity (TFP) growth in China and India and relates TFP growth in each country to policy milestones and investment in agricultural research.Design/methodology/approachTFP is measured using a non‐parametric Malmquist index which allows the decomposition of TFP growth into its components: efficiency and technical change.FindingsComparing TFP growth in China and India it is found that efficiency improvement played a dominant role in promoting TFP growth in China, while technical change has also contributed positively. In India, the major source of productivity improvement came from technical change, as efficiency barely changed over the last three decades, which explains lower TFP growth than in China. Agricultural research has significantly contributed to improve agricultural productivity in both China and India. Even today, returns to agricultural R&D investments are very high, with benefit/cost ratios ranging from 20.7 to 9.6 in China and from 29.6 to 14.8 in India.Originality/valueThe applied methodology and the comparison between TFP growth patterns contribute to a better understanding of the consequences that the different approaches to agricultural reform followed by China and India had on the performance of agriculture in both countries.