The Pakistan Development Review

44 : 4 Part II (Winter 2005) pp. 729–746

Total Factor Productivity Growth and Agricultural

Research and Extension: An Analysis of
Pakistan’s Agriculture, 1960–1996
SHUJAT ALI

INTRODUCTION
Pakistan’s agriculture has grown rapidly since the 1960s, with an average
annual growth of about 4 percent over the four decades till the end of the century.
Agricultural growth at this rate was sustained by the technological progress
embodied in the high-yielding varieties of grains and cotton, with supporting public
investment in irrigation, agricultural research and extension (R&E), and physical
infrastructure. This rate of agricultural growth has significantly contributed to the
overall economic growth of about 6 percent per year during this period. Sustaining
this performance presents a considerable challenge for the public policy framework
for agriculture, not the least for the agricultural research and extension system in
Pakistan.
The central role of technological change in increasing agricultural
productivity is well established in the wake of the Green Revolution experience
across much of Asia. In the context of Pakistan, it has been estimated that almost 58
percent of the total output growth from 1960 to 1996 was due to technological
change [Ali (2000)]. While improvements in the physical and market infrastructure,
farmer education, price policies, and weather, all have their place in enhancing
agricultural production, R&E investments has been regarded by far the most
important contributor to agricultural productivity growth [Evenson and Rosegrant
(1993); Byerlee (1994)].
Studies evaluating agricultural research have usually found high rates of
return to investment—much higher than alternative investment opportunities—
Shujat Ali is Chief Economist, Planning and Development Board, Punjab.
Author’s Note: This paper is based on my doctoral dissertation titled “Productivity Growth in
Pakistan’s Agriculture: 1990-1996” submitted in the year 2000 in partial fulfillment of the requirements
for the degree of Doctor of Philosophy in the Department of Economics, Simon Fraser University,
Canada. The high quality dissertation supervision provided by Professors Mahmood Hasan Khan, Peter
Kennedy and Don Devoretz is gratefully acknowledged.
730 Shujat Ali

indicating non-optimal allocation of societal resources. Given the tight budget that
most national governments face, the only way to enhance research budgets or to keep
them from falling is to make a cogent case based on the potentially high rates of
return that can be obtained from agricultural research investment. This study is an
attempt to develop such a case based on estimates of the rate of return to agricultural
research and extension in the agricultural sector of Pakistan.

AGRICULTURAL RESEARCH AND EXTENSION IN PAKISTAN

The agricultural research system in Pakistan includes research organisations at
both the federal and provincial levels. Extension is largely carried out by the provincial
agricultural departments. The agricultural research and extension system in Pakistan,
despite its constraints, has performed reasonably well over the years. During the early
days of the Green Revolution, adaptive research experiments by the research institutes
and the dissemination of the results by the extension agency played an instrumental
role in the rapid spread of High Yielding Varieties (HYVs) of wheat and rice. During
the 1980s, the rapid growth in cotton productivity was a result of a major breakthrough
by the national research system in developing a high yielding variety for cotton. This
notwithstanding, the research system’s performance over the period lagged behind that
of other countries with comparable agricultural conditions (Table A.1). In 1996, except
for cotton, Pakistan’s yield/hectare for wheat, rice and sugarcane, the major crops, was
sizably lower than India—a neighbouring country with nearly similar soil and weather
conditions. Cotton output/hectare in Pakistan is only two-thirds of the yield level in
Egypt and Mexico. There is a still a substantial shortfall within the country between the
best performance yields on the experimental plots and what the farmers achieve on
their farms, the so-called “yield gap” [Byerlee (1994)] requiring bold initiatives for
improving the efficiency and effectiveness of the agricultural research and extension
system.

REVIEW OF THE LITERATURE

The relationship between agricultural research expenditure and agricultural
output/productivity is usually explored in a production function setting with
specifications varying according to the nature of the data and objectives of the study
[Knutson and Tweeten (1979); Norton and Davis (1981); Evenson and Pray (1991)]
As the impact of research and extension on output/productivity spans over many
time periods, proper modeling of the lag relationship assumes considerable
importance in the overall modeling strategy. To circumvent the econometric
problems relating to degrees of freedom and multicollinearity, researchers have used
a variety of different deterministic lag formulations ranging from simple averages
over time periods to more sophisticated versions such as geometric, inverted V,
trapezoidal, and polynomial lags.
 Total Factor Productivity Growth and Agricultural Research 731

Davis (1980), estimated an aggregate output Cobb-Douglas production

function model for U.S. agriculture with a range of alternative lag structures and
found that the conventional input coefficients as well as the research production
coefficient were, by and large, the same across all specifications.1 Use of the
simplistic lag formulations in this context saves on the data collection effort. Pardey
and Craig (1989) in their study find that while summary statistics of the lag
relationship such as the mean and variance are generally not very sensitive to the
choice of the lag structure, the implied rate of return to agricultural research is,
however, quite sensitive to partial research production coefficients that are estimated
with models with inappropriate lag structures. To fully account for the effect of
research on output/productivity, the study indicated the need for long lags of at least
thirty years.
Fernandez-Cornejo and Shumway (1997) have examined the agricultural
research productivity relationship for Mexican agriculture for the period 1940-90. First,
a Tornqvist-Theil (T-T) Total Factor Productivity (TFP) index is calculated. Then, in
an application of two-stage TFP decomposition procedure, a regression model
explaining TFP in terms of agricultural research spending (public research and
agricultural extension) and a proxy for international transfer of technology are
proposed.2 Applying cointegration technique, the authors were able to determine a
unique long-run relationship between TFP, agricultural research investment, and U.S.
agricultural productivity—used as a proxy for international transfer of technology in
Mexican agriculture. Using the productivity elasticity of research from the estimated
relationship, the average annual rate of return to research investment is estimated at 64
percent. Makki, Thraen, and Tweeten (1999), explain productivity growth in U.S.
agriculture sector in terms of time-series data on public and private research
investments, farmers’ education, terms of trade, government commodity programmes,
and weather. A significant cointegrating relationship is found between research
investment and agricultural productivity. Based on the estimated coefficients on the
lags of public and private research variables, the authors estimate the internal rate of
return of 27 percent for the public R&E and 6 percent for private R&D.
In the context of Pakistan, Khan and Akbari (1986) estimated a relationship
between agricultural output and agricultural research and extension in a production
function setting with a 10-year lag structure and found the rate of return to
agricultural research to be 32 percent. Nagy (1991) estimated a productivity
decomposition model for the period 1959-60 to 1978-79, in which TFP is
functionally related to current weather conditions, current education level of farmers

1
Six different formulations for lag structures ranging from the simplest requiring use of only the
current year’s expenditure level to the more complicated constrained polynomial lag were used.
2
A proxy for farmers’ education was included in a preliminary specification but found to be
collinear with other variables and statistically insignificant. Weather proxies similarly were found to be
statistically insignificant as was to be expected given that Mexico straddles many climatological zones.

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732 Shujat Ali

and the impact of research and extension. In an ordinary least squares estimation,
eight, ten and twelve year lags for the research expenditure and extension variable
were tried and Nagy found the ten-year lag to be statistically superior to the other
two lag specifications. Utilising the estimated coefficients of research and extension,
the marginal internal rate of return to agricultural research and extension in Pakistan
was calculated to be 64.5 percent. Rosegrant and Evenson (1993), in their study of
TFP for Pakistan’s crop sector, found research variables, share of modern varieties,
literacy and overall share of irrigation to have the greatest impact on productivity
growth. Their estimate of the marginal rate of return to crop-specific research is 58
percent, general research 39 percent, and that specific to HYVs 51 percent.

Methodological Framework
The relationship between productivity growth and R&E investment is
commonly explored with the following Cobb-Douglas specification [Lu, et al.
(1978); Norton and Davis (1981); Thirtle and Bottmley (1989); Nagy (1991)].
n
P = AW γ E θ ∏ Rtα−ti−i .e ν … … … … … (1)
i =0

where P is the productivity index of agricultural output; W is the weather index; E is

a measure of the schooling level of farmers; Rt −i is expenditure on R&E; α t −i are
the partial productivity coefficients of R&E in the ith year; and γ and θ are the
productivity coefficients for the other inputs. It is also quite commonplace in the
literature to make ad hoc additions of explanatory variables to this specification to
control for infrastructural and other policy effects on productivity [Evenson and Pray
(1991); Evenson, et al. (1999)].
In the context of agricultural research, the lag structure—its shape, order and
length—is usually decided on the basis of prior knowledge about various time phases
in the generation of agricultural research and its application. In general, the research-
adoption process in agriculture consists of three time phases: (1) research lag
between the initiation of research and generation of pretechnology knowledge; (2)
development lag, when results from pretechnology research are incorporated into
useful technology; and (3) adoption lag between the release of agricultural
technology and its optimal adoption by farm producers. [Alston, et al. (1995)]. The
extent of the lag in a particular situation would depend on whether the activity was
initiated from scratch or there was scope for building on the work/results obtained
elsewhere. In most developing countries, the agricultural research activity typically
begins with the importation of basic technology developed elsewhere, which is then
adapted to local conditions on the basis of field trials in various agro-climatic zones.
In this case, the lags are shorter than those associated with research of a more
 Total Factor Productivity Growth and Agricultural Research 733

fundamental nature. In some contexts—U.S. agriculture, for example—lags

extending back 30 years are considered appropriate. In Pakistan, the average lag
between the availability of technology and its adoption, against the Green Revolution
background, is generally considered to be about 8-12 years. Khan and Akbari (1986)
and Nagy (1991) have used lag structures of ten years and eight years, respectively.
It is customary to postulate that the impact of agricultural research is small to
begin with, but gradually builds overtime to a peak level and, then, decays till it
becomes negligible [Thirtle and Bottomley (1989); Nagy (1991)]. While various lag
schemes have been tried to model these effects, the second-degree polynomial lag
scheme—the Almon lag—is used frequently. Its advantage lies not only in its ability
to mimic the postulated inverted ‘U’ shape diffusion process of agricultural research
but also in its convenient estimation technique that avoids problems of collinearity
and degrees of freedom inherent in an unrestricted lag estimation.3

DATA
The total factor productivity index for Pakistan’s agriculture sector has been
calculated by Ali (2000) using the T-T TFP methodology. Agricultural research data
is not reported on a regular basis in the official publications. It had to be collected
from various agencies of the government. The agricultural research data pertains to
the four provinces—Punjab, NWFP, Sindh and Balochistan—and the federal
government (West Pakistan) for the period before the present provincial set-up came
into being. While the provincial expenditures include the development and non-
development expenditures on the provincial research institutes, data for the Pakistan
Agricultural Research Council (PARC) and the Pakistan Central Cotton Committee
(PCCC), autonomous bodies under the federal government, was obtained separately.
The provincial and federal data were added together to generate a total annual
research expenditures series for the period 1960-96. As these figures were available
in current terms, they had to be converted into real terms using the GDP deflator
with base 1980-81. The use of GDP deflator has been necessitated by the fact that a
more closely relevant deflator is not available in Pakistan.
The extension activity is almost entirely carried out the agriculture
departments of the provincial governments. The salaries and other recurring costs of
extension services are met from the provincial non-development (revenue) budget.
The total annual extension expenditure has been estimated by deducting the
agricultural research expenditure (non-development and development) of all four
provinces from the total expenditure (non-development and development) of
provinces on agriculture. While total provincial expenditure (non-development and
3
Endpoint restrictions are also typically imposed to obviate the possibility of implausible negative
coefficients at the beginning and the end of the lag distribution as can often happen with the recovery of
lagged parameters from the estimation of only three parameters of a quadratic polynomial function
[Alston, et al. (1995), p. 182].

733
734 Shujat Ali

development) on agriculture is reported in official documents, agricultural research

expenditure (non-development and development) for the provinces were not readily
available. This data had to be collected informally through the relevant agencies. The
annual extension expenditure data had to be deflated with GDP deflator to convert it
into real terms.

PRODUCTIVITY-RESEARCH RELATIONSHIP:
MODEL AND ESTIMATION
The relationship between productivity and R&E, in the context of Pakistan,
can be specified as:
n
TFP = A..∏ REStα−ti−i .eT + D1+ ε … … … … (2)
i =0

Where TFP = total factor productivity index using the T-T procedure;
RES = real agricultural R&E expenditures(R&E);
T = time trend;
D1 = 0-1 dummy variable to capture the influence of weather, floods etc.
during 1974-75, 1983-84, and 1992-93.
ε = error term.
The model is estimated in log-log form with annual time-series data for the
sample period (1960–96). The coefficients of the R&E variable are assumed to lie on
a quadratic Almon polynomial lag. The justification for using the R&E variable is
obvious in the context where the major productivity gains are attributed to new
agricultural technologies including the introduction of the new hybrid seeds
technology. A weather variable is usually included in a specification of this type, but
in the present case no suitable weather time-series was available.4 Therefore,
weather dummies are being used to capture the influence of weather for three of the
most affected years.5 A time trend has been added to capture the influences on TFP

4
Nagy (1991) in his estimation of the productivity-research relationship for the crop sector in
Pakistan for the years 1959-60 to 1978-79 found that weather turned out to be insignificant in all his
models. Based on this outcome, he concludes, “the problem, in part, may arise from the unexpectedly high
correlation between the weather and RE variables. Second, rainfall may not be a good measure of weather
effects because it is averaged over all of Pakistan on a yearly basis and is not combined with a temperature
variable that account for stress periods in the plants. Third, about 70 percent of Pakistan’s cropped land is
irrigated, and 85-90 percent of all wheat and all rice are grown in irrigated land. Thus the variation in
overall total yields attributable to rainfall and overall weather effects is dampened.” (p. 109) Khan and
Siddiqui (1982) have also argued that “rainfall alone cannot be a proper measure of the influence of
weather on crop growth and information on other equally important components of weather is usually not
available or difficult to incorporate.” ( p. 150 ).
5
The dummy variable takes the value of 1 for the years 1975, 1984, and 1993 to capture the
extraordinary weather/climatic events during these years.
 Total Factor Productivity Growth and Agricultural Research 735

systematically changing with time. An education/schooling variable has not been

included because census data is only available at ten year intervals and the within
censuses interpolated data may not be adequate for the purpose. Nagy (1991), who
constructed a literacy index from the rural literacy data from population censuses,
has found that “all models that included the literacy index variable were also
statistically inferior” (p.108).
The results of estimations with lagged R&E variable are presented in Table 1.
First the specification was estimated with twelve lags in the light of the previously

Table 1
Distributed Lag Parameter Estimates
Dependent Variable: log TFP
Constant –1.59 –3.91 –3.72
(–0.76) –1.37 (–1.27)
Trend –0.007 –0.015 –0.014
(–0.72) (–1.10) (–1.00)
Dummy Variable 0.027 0.031
(1.13) (1.41)
Estimated Lag Twelve Lags Sixteen Lags (with Sixteen Lags (without
Coefficients Weather Dummy) Weather Dummy)
0 0.009 0.008 0.007
1 0.017 0.015 0.014
2 0.024 0.021 0.021
3 0.029 0.026 0.026
4 0.033 0.031 0.030
5 0.035 0.034 0.033
6 0.036 0.036 0.035
7 0.035 0.038 0.037
8 0.033 0.038 0.037
9 0.029 0.038 0.037
10 0.024 0.036 0.035
11 0.017 0.034 0.033
12 0.009 0.031 0.030
13 0.026 0.026
14 0.021 0.021
15 0.015 0.014
16 0.008 0.007
AIC 0.0018 0.0010 0.0010
Schwartz 0.0021 0.0012 0.0012
Sum of Lags 0.335 0.463 0.452
T-ratio (2.94) (2.91) (2.78)
R-Sq Adj 0.94 0.96 0.96
D.W. 0.83 1.50 1.74
P-value 0.603 0.347 0.867
DOF (12,9) (16,1) (16,2)
Note: Numbers in parenthesis are t-values.

735
736 Shujat Ali

observed lag length of 8-12 years. However, the specification with sixteen lags
performs better than that with twelve lags. It explains 96 percent of the variation in
agricultural productivity and also has lower values for both the AIC and Schwartz
criteria. The estimated value for the F-test on restrictions—resulting from
constraining the coefficients to lie on a second-degree polynomial as well as
restrictions on the endpoints of the lag distributions—are 0.862, 4.761 and 0.434
for twelve lags, sixteen lags (with weather dummy) and sixteen lags (without
weather dummy) respectively. These values do not reject the null hypothesis that
the restrictions are valid. The lag coefficients are significant, symmetric U-shaped
and rise to a peak value of 0.037 in eight periods. Total lag effect (sum of lags) is
significantly different from zero and adds up to 0.452, which in the context of this
log-log specification can be interpreted as a 1 percent increase in the R&E variable
leading to an increase of 0.45 percent in the TFP index. Both the time trend and the
dummy variable for years of calamitous weather are wrongly signed but
insignificant. The specifications with twelve lags and sixteen lags with the weather
dummy included have low D.W values compared to the specification with sixteen
lags but without the weather dummy. The specification without the dummy
variable has been chosen for the purposes of estimation of the marginal rate of
return to R&E.

Marginal Internal Rate of Return to Research and Extension

A standard methodology for estimation of the marginal internal rate of return
to R&E expenditures is widely used in the literature [Knutson and Tweeten (1979);
Thirtle and Bottomley (1989); Nagy (1991); Fernandez-Cornejo and Shumway
(1997) and Evenson, Pray and Rosegrant (1999)].
The estimation of the MIRR involves the relationship in Equation (2) being
estimated in double log form, with each lag coefficient on the R&E variable
representing the productivity elasticity of R&E for that year. This can be written as:

∂ log TFPt ∂TFPt RESt −i

αi = = . … … … (3)
∂ log RESt − i ∂RESt − i TFPt

Rearranging the above elasticity expression, the marginal physical productivity of

research can be expressed as:

∂TFPt TFPt
= α i .( ) … … … … … (4)
∂RESt − i RESt − i

TFPt
Replacing by the means of these variables for the period under
RESt − i
consideration and using discrete approximations leads to:
 Total Factor Productivity Growth and Agricultural Research 737

−
∆TFPt TFP
= αi ( − ) … … … … … (5)
∆RESt − i
RESt −i

The change in productivity can be converted into a change in the value of output if
both sides of Equation (14) are multiplied by the average increase in the net value
(net of inputs) of output (Y) caused by a one index point increase in productivity:6
−
∆TFPt ∆Yt TFP ∆Yt
. dTFPt = α i ( − ). dTFPt … … (6)
∆RESt − i ∆TFPt ∆TFPt
RESt − i

From this, the value marginal product of research in period (t–i) can be written as:
−
∆Yt TFP ∆Yt
VMPt −i = = α i ( − ). … … … (7)
∆RESt −i ∆TFPt
RESt − i
−
∆Yt TFP
With the value of output ( ) and ( − ) calculated as averages, α i varies
∆TFPt
RESt − i
over the lag period providing a series of marginal value products resulting from a
unit change in R&E expenditures. The marginal internal rate of return (MIRR) can
be obtained from these annual flows of value benefits from a unit change in R&E
expenditure with the following standard formula:
n ⎡VMPt −i ⎤
∑⎢ i⎥
− 1 = 0 where n is the length of the lag. … … (8)
i ⎣ (1 + r ) ⎦

The marginal internal rate of return to R&E has been estimated with
productivity elasticities from the specification with 16 lags. The estimated rate of
return at 88 percent, is a high return both absolutely and in relation to what can be
earned on alternative investments. This high rate of return is a strong indicator of
underinvestment in R&E for Pakistan’s agriculture. High rates of return to
agricultural research have been found in many studies (Table 2).7 Even where
methodologies have differed, the rates of return have been generally much higher
than the return on alternative investments.
6
As the outputs used in the estimation of the T-T output index only covered about 70 percent of
the total agricultural output, pre-aggregated gross value of output (at 1980-81 prices) data reported in
Kemal and Ahmad (1992) were used for estimation of net value of output.
7
The high documented returns to agricultural research in Pakistan have been mainly generated by
varietal improvement research programmes for the major crops, some of which have been conducted in
co-operation with the international research centres (such as IRRI for rice and CIMMYT for wheat).

737
738 Shujat Ali

Table 2
Returns to Agricultural Research in Pakistan and Other Countries
Country/
Period of Type of Research/ MIRR
Study Methodology Commodity (%)
Azam, et al. (1991) Pakistan TFP All Research 58
1956-85 Decomposition
Evenson and Bloom (1991) Pakistan TFP All Research 65
1955-89 Decomposition
Nagy (1984,1991) Pakistan TFP All Research 64.5
1960-79 Decomposition
Azam, et al. (1991) Pakistan TFP Wheat 76
1956-85 Decomposition Cotton 102
Iqbal (1991) Pakistan Cotton
1971-88 Punjab 90
Sindh 50
Khan and Akbari Pakistan Aggregate All Research 36
(1986) 1955-81 Production and Extension
Function
Kahlon, et al. (1977) India Aggregate All Research 63
1960-73 Production
Function
Evenson and Mckinsey India TFP Public Research 218
(1991) 1958-83 Decomposition Extension 176
Salmon (1991) Indonesia TFP Rice Research 151
1965-77 Decomposition
Evenson, Pray and India TFP Public Research 58
Rosegrant (1999) 1956-87 Decomposition Public Extension 45
Thirtle, et al. (1993) Zimbabwe TFP All Research and 40-60
1970-90 Decomposition Extension
(Commercial Farms)
Thirtle and U.K TFP All Research and 100
Bottomley (1989) 1967-87 Decomposition Extension
Thirtle, et al. (1995) European TFP All Research
Agriculture Decomposition (Public)
1973-89
Greece 564
Italy 85
Netherlands 102
Fernandez-Cornejo Mexico TFP All Research and 64
and Schumway (1997) 1940-90 Decomposition Extension
Source: National Master Agricultural Research Plan (1996-2005), PARC, MINFA, Islamabad; Evenson,
Pray and Rosegrant (1999) Table 32.
 Total Factor Productivity Growth and Agricultural Research 739

CONCLUSION AND POLICY IMPLICATIONS

The impact of R&E investment on TFP growth in Pakistan’s agriculture has
been analysed within a distributed lag framework. The estimation of the
productivity-R&E relationship provided evidence of a strong relationship, explaining
96 percent of the variation in the TFP index. The marginal internal rate of return on
R&E investment is estimated at 88 percent. This rate of return may look unusually
high but it is well within the range of returns estimated in the context of developing
and developed countries. The high rate of return is an indicator not only of
underinvestment in R&E but also of the constraints on the research and extension
system that prevent optimal performance that should drive down this high rate of
return to the level on alternative investments.
The existing research system while it has substantial achievements to its credit
in the field of plant breeding research, as evidenced by the varieties released for
wheat, rice and cotton and the high pay-off genetic gains embodied in them, the crop
and resource management research (CRMR) has not been at par. With an effective
CRMR programme, we would not have seen the prevalence of farm level
inefficiencies in input use, mainly fertiliser and water, that we see today.
Strengthening CRMR for meeting the productivity and sustainability challenges of
the future requires decentralisation and rationalisation of the existing system. The
goal should be a revamped system with a multidisciplinary and site specific approach
based on active participation of the farmer [Byerlee (1994)]. While this poses a
critical medium-term institutional reform challenge, what is needed above all, for an
effective research system in the short term is an enhancement in its funding levels.
According to a study by Nagy and Quddus (1998), an optimally funded Pakistan
agricultural research system needs to be funded at five to six times the present
funding levels. “A research system funded at this level would approach international
agricultural research standards, one that could deliver significant productivity and
production increases. This would bring Pakistan’s funding of agricultural research
closer to the funding level of 1.5 percent of Agricultural Gross Domestic Product
(AGDP) recommended by the National Commission of Agriculture8” [Nagy and
Quddus (1998), p.181].
In the post Green Revolution period, the farming environment has grown
more complex not only because of the multiple cropping systems made possible by
the new technology but also because of emerging sustainability concerns of
intensified use of inputs. In areas with diminishing returns to further input
intensification, farmers need to switch from intensified input use to new input
conserving strategies to sustain profitability and productivity growth. It is clear that a
one-way, standardised message or ‘recipe’ approach to extension is no longer

8
Report of the National Commission on Agriculture (1988). Ministry of Food and Agriculture,
Government of Pakistan, Islamabad.

739
740 Shujat Ali

workable in this context. The knowledge and improved management skills for
adapting to the changing agricultural environment can only be imparted through an
upgraded extension agency that has an enhanced capacity for problem solving in
diverse locales. This requires not only upgrading the skills of the existing extension
agents through enhanced field oriented training but, more importantly, improving the
linkages between research, extension and the farmers. For this to happen both
research and extension workers would have to increase their interactions with the
farmers and incorporate farmer concerns much more explicitly into their work plans
than before. One way of doing this would be to decentralise the adaptive research
organisation to the local level.9
While improvements in research-extension-farmer linkages and greater
accountability of these public agencies to the farmers would enhance their
effectiveness, the likely payoffs would remain limited unless accompanied by
substantial investments in basic education of the farmers. It is widely recognised that
literate farmers—with formal schooling—are better adapters to changes in the
technological and economic environment than the less literate. The required
investments for rapid spread of basic education in the rural areas should figure
prominently on the budgetary priorities of the government.

9
The farmers’ demand for new technologies, crop, livestock and resource management
information would be met by these localised adaptive research establishments, who would be acting as the
meeting point for suppliers and demanders. With the local adaptive research set-ups serving as avenues for
a “two-way dissemination of information between research establishment (suppliers) and farmers
(demanders)—a large part of the extension service can be done effectively through these entities in
collaboration with the private sector companies and farmers (village) organisations” [Khan (1998),
p. 333].
 Total Factor Productivity Growth and Agricultural Research 741

Annexure

Table A.1
Yield per Hectare Performance for Main Crops in Main Producing Countries,
1961-65, 1980, 1996
Wheat Rice Cotton Sugar Cane
(Kg/Hectare) (Kg/Hectare) (Kg/Hectare) (Kg/Hectare)
World
1961-65 1209 2040 957 49394
1980 1877 2770 1277 54328
1996 2536 3730 1581 61304

Pakistan
1961-65 833 1417 783 34247
1980 1563 2418 1017 38271
1996 2018 2451 1463 46963
India
1961-65 835 1480 388 44807
1980 1436 2010 488 49358
1996 2510 2811 922 65892

Mexico
1961-65 2085 2290 1717 61530
1980 3771 3456 2633 66869
1996 3894 2468 76573
Brazil
1961-65 707 1607 627 43332
1980 872 1570 865 56069
1996 1800 2558 1187 67227
China
1961-65 882 2780 903 54555
1980 1878 4200 1651 49019
1996 3759 6062 2302 53197
U.S.A
1961-65 1700 4374 1488 88001
1980 2249 4946 1211 82497
1996 2442 6860 2043 74010
Egypt
1961-65 2621 5307 1764 90061
1980 3225 5755 2678 84060
1996 5638 8291 2326 109533
Source: FAO Production Yearbooks (Various Years).

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REFERENCES
Ali, S. (2000) Productivity Growth in Pakistan’s Agriculture, 1960–1996. PhD
Thesis. Economics Department, Simon Fraser University, Canada.
Alston, J. M., G. W. Norton, and P. G. Pardey (1995) Science under Scarcity:
Principles and Practice for Agricultural Research Evaluation and Priority
Setting. Ithaca: Cornell University Press.
Azam, Q., E. Bloom, and R. Evenson (1991) Agricultural Research Productivity in
Pakistan. Economic Growth Centre, Yale University (Discussion Paper No. 644.)
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744 Shujat Ali

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Comments
Dr Shujat Ali has analysed the impact of Research and Extension (R&E)
investment on total factor productivity (TFP) growth in Pakistan. He also estimates
the marginal internal rate of returns to investment in agricultural R&E. The study
provides evidence on high pay-off from investment in research and extension. The
author has used country level data for estimating the relationship between TFP and
R&E. The author has a sound background in the methodology used. In the overall,
this paper is quite illuminating and interesting however, I have few comments that
would help improving the quality and usefulness of the study if incorporated.
The author included few variables (trend variable and weather dummy) in
addition to R&E and a reasonable number of it lags in the estimated model. This
makes the model too simple. The author should have included in the model other
important independent variables like infrastructure. Similarly, there is a need to
update the estimates by including data beyond 1960 to 1996 period.
The author, soon after specifying the model to be estimated, stated that
justification of R&E variable is obvious in the context where the major gains are
attributed to the introduction of the new hybrid seeds technology. The study used the
R&E variable which is in aggregate form and gains from it should be attributed to all
the technologies resulting from such an investment. The author need not seek
justification of including R&E in the model to a single technology.
The F-test statistics reported in the table giving estimates for the distributed
lag models using various lags give the impression that the F-test is for overall
regression whereas the author used it to test the validity of restrictions imposed. This
should be removed from the table and stated while discussing the restrictions and
their testing.
The author has included dummy variable (D1) to capture the influence of
abnormal (bad) agriculture years but has not made it explicit that value of 1 was
assigned to bad years or otherwise. This should be made clear to understand the sign
of the coefficient for this dummy variable.
I fully agree with the author that R&E funding need to be enhanced many
folds than its present level in Pakistan. In addition to enhanced allocation of funds
towards R&E, there is a need to optimally allocate the available funds among various
disciplines. Currently, most of the budget allocation is meant for research on crops
(mainly for the major crops) whereas disproportionately small amounts are allocated
to research on livestock (presently the largest contributor to the value added in
agriculture), horticultural crops, natural resource management, and fisheries etc.
746 Muhammad Iqbal

Moreover, research system in Pakistan offers limited career growth

opportunities and little financial incentives even to the highly qualified scientists.
Most of the institutions lack access to quality literature and modern lab equipment to
undertake quality research. The scientists have inadequate links with the
international and national research and educational institutions, entrepreneurs,
extension agents, and the farmers. There is rapidly aging profile of agricultural
scientists and a continuous brain drain from the system. The science gap is widening
due to fast moving scientific development internationally. The present national
research system is ill-equipped to meet even the present challenges not to speak of
2020 and beyond. Pakistan must introduce a more knowledge-intensive agricultural
research system that focus on technological innovations at the system level and has
access to modern biological sciences.
The discussion of results in more detail would help in improving the
readability of the paper. Some of the references listed are not cited anywhere in the
paper and some of the cited studies are not listed in the references. Also dates for
some of the cited studies differ from those given in the references. All these need to
be corrected.

Muhammad Iqbal
Pakistan Institute of Development Economics,
Islamabad.