Trade Liberalization, domestic input and sustainability of agricultural TFP growth: A new Perspective Based on TFP growth structure

Abstract

Abstract As one of the fundamental ways to solve the food security and promote farmers’ income, agriculture Total Factor Productivity (TFP) growth has attached a great concern which is examined in a vast literature. However, there is little work that examines sustainability of the growth, which is more significant for future development of agricultural sector. Moreover, whether trade openness and domestic investment policy which are used to promote the agricultural TFP growth also could play a great role in the sustainability of the agricultural TFP growth is rarely examined. We estimate and decompose China's agricultural TFP using Data Envelopment Analysis (DEA), finding that technical change is the main source of China's agricultural TFP growth since 1978, favoring that TFP growth is lack of sustainability. In addition, using two-stage estimation procedure, we make an empirical analysis about the impact of trade openness and domestic input on TFP structure. Results show that trade openness and agricultural infrastructure is narrowing the gap between the two sources, while agricultural scientific investment is just the opposite. Therefore an in-depth trade openness and agricultural infrastructure are needed favoring the growth of China's agriculture, while agricultural scientific investment should be conducted after a higher level of trade openness and agricultural infrastructure.