What Explains Total Factor Productivity in Agriculture: An Empirical Investigation Using Panel Data Analysis

Considering population projections, which are estimated to be 10 billion people in the world by 2050, agricultural demand is expected to rise by about 50% compared to 2013 levels, even under a moderate economic development scenario. The number of people will increase in cities, and higher income levels per person will all have a significant impact on future food demand. There is only one way to raise food production without further depletion of natural resources, and that is to boost total factor productivity (TFP). This study uses panel data analysis to investigate the factors that affect agricultural TFP in both developed and developing countries. Data is taken from the USDA/ERS (the United States Department of Agriculture/Economic Research Service), the World Bank, Penn World Table, and FAO over the period of 2002–2016 and consists of 32 developed and developing countries. According to our results, TFP in agriculture is increasing with the high level of human capital in developing countries. Moreover, the results of the study indicate that increases in gross fixed capital formation and the amount of arable land in both groups of countries contribute positively to TFP. However, TFP decreases while the agricultural employment rate increases for both developed and developing countries.