SOURCE OF TOTAL FACTOR PRODUCTIVITY CHANGE: AN EMPIRICAL ANALYSIS OF GRAIN PRODUCING REGIONS IN NORWAY

Habtamu ALEM, Norwegian Institute of Bioeconomy Research

Abstract:
In this article, we estimate the progress of Total Factor Productivity (TFP) in the Norwegian grain production sector. Previous studies conducted in TFP estimation can be criticized for estimated production function relied on the assumption that the underlying technology is the same for all regions and firms face similar environmental conditions. In reality, agricultural firms in different regions resource endowment, adoption of new technology, and innovation might be different because of farmers face different production opportunities. For this study, we classified the country into two main grain producing regions with district level of development, and hence production technologies. We used farm level balanced panel data for 19 years (1996-2014) with 1463 observations from farms specialized in grain production. We applied the ‘true’ fixed effect stochastic frontier model to estimate region level efficiency and source of productivity changes. The result of the analysis shows that there has been a productivity improvement in the sector, and technical change has had the main source of productivity change.

Keywords: Productivity, Technology, sustainable development, and Region

JEL Classification: R58, O52, Q16, C23

Volume: 69, Issue: 6

Pages: 8 - 18

Publication date: December, 2017

Download the article: http://economice.ulbsibiu.ro/revista.economica/archive/69601alem.pdf

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