Total Factor Productivity and the Efficiency of Rice Farms in Bangladesh: a Farm Level Panel Data Comparison of the Pre- and Post-Market Reform Period
The market reform policy in agriculture and the trade liberalization during the early 1990s has led to structural changes in the agricultural sector of Bangladesh. The question of whether market reform policies in Bangladesh facilitated rice production is examined in this paper. This paper uses stochastic frontier production function to measure total factor productivity (TFP), technical change, and technical efficiency change covering the period of pre-market reform (1987) and post-market reform (2000 and 2004). To fulfill the objective, the study used panel data of 73 same farm households from a field survey of 1987–1988, 1999-2000 and 2003-04. It is evident from the study results that over time period (1987-2004), the TFP increased (31.76%) only due to upward shift in the technology. Technological change increased 59.99% in post reform period. However, although TFP increased substantial inefficiencies remain in Bangladesh rice sector. Technical efficiency change (-34.46%) developed negatively over the years of study at farm level. Market reform policy has negative impact on technical efficiency change but positive in technical change and TFP change although all are declining over the time period. Therefore, government policies need for further reform of domestic market and trade policies focusing on institutional changes, tariff and nontariff barriers in order to develop a competitive environment in rice sector.
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