Efficiency and Agricultural Productivity Growth in Melanesian Countries of the South Pacific

This study aims at identifying the sources of agricultural productivity growth and its determinants in the Melanesian countries of the South Pacific. Using Malmquist DEA Index, the FAO time series data of two outputs and three inputs are calculated to construct the agricultural Total Factor Productivity (TFP) growth patterns with its components during 1961 to 2005. The TFP change is calculated and is tested with the determinant variables for significance levels. The determinant variables are foreign aid, agriculture export, agriculture import, natural disasters and dummy variables. The empirical results show that each Melanesian economy has its own patterns of cumulative TFP growth. The results further indicate that the major source of productivity growth is technical progress rather than efficiency change. Regression results show that foreign aid has positive impacts on Fiji and Solomon Islands agriculture productivity. Agriculture export has significant influence on agriculture productivity in Fiji and Vanuatu, while agriculture imports have negative impacts on agricultural productivity of Vanuatu but has positive influence for Papua New Guinea. By using dummy variable, the result also shows that natural disasters do not have impacts on agricultural productivity in these economies. While some countries in the region benefited from their MSG regional trade organization, others have shown no influence on the TFP change. Solomon Islands have two distinct periods in the study that shows better TFP in 1962 to 1986 but poor TFP growth in 1987 to 2005. TFP growth in New Caledonia has three distinct periods and shows 1974 to 1989 has poor TFP growth. In order to raise agriculture productivity in the Melanesian region, appropriate land reform programs need to be implemented with the help of agricultural subsidies. To achieve the full potential from foreign aid in the agriculture sector, aid flowing into the region needs to have proper coordination and alignment should be focused on the development needs of each country. An implementation of good policy programs with a vibrant domestic and international market will help farmers to boost the agricultural productivity in the region.Abstract iedication iicknowledgement iiihapter 1 Introduction 1.1 Motivation. 3 1.2 Importance of Food Self-Sufficiency ………………………………………….11.3 Objectives 13hapter 2 Overview of the Melanesian Countries 14 2.1 Country General Statistics …………………………………………………….14 2.2 Smallness and Remoteness of Islands …………………………………………17.3 The international competitiveness 18.4 International Trade 20.5 Exports and Barriers 21.6 Small Population 22.7 Highly Rural and Subsistence Agriculture……………………………………..22.8 Food Security 23.9 Environment and Pest Problems 23.10 Poor Infrastructure 24.11 Agricultural Services 25.12 Lack of Financial Services 26.13 Foreign Aid 26.14 Land Tenure System 27 2.15 Importance of Livestock and Crops…………………………………………..30hapter 3 Literature Review 33.1 Past Research 33.2 Research Methods 38.2.1 Malmquist Index 38.2.2 Regression 39.3 The determinant Factors 41.3.1 Foreign Aid 41.3.2 Agricultural Exports 45.3.3 Agricultural Imports 47 3.3.4 Trade Organization …………………………………………………………..49.3.5 Natural Disasters 50hapter 4 Methodology 54.1 The Malmquist DEA Model 54.2 Data 57.2.1 Two Outputs 58.2.2 Three inputs 60.3 The Regression Model 62.3.1 Data 68.3.1.1 Foreign Aid 68 4.3.1.2 Agricultural Exports………………………………………………………..70.3.1.3 Agricultural Imports 71.3.1.4 Natural Disasters 72 4.3.1.5 Dummy Variables…………………………………………………………..73 4.3.1.5.1 Joining MSG Trade Organization………………………………………..73 4.3.1.5.2 Sudden TFP drop…………………………………………………………74hapter 5 Results and Discussion 76 5.1Sources of TFP change …………………………………………………………76.2 Empirical Analysis of Total Factor Productivity Change. 76 5.2.1 Fiji TFP Growth Pattern……………………………………………………...77 5.2.2 Papua New Guinea TFP Growth Pattern ……………………………………78 5.2.3 Solomon Islands TFP Growth Pattern……………………………………….79 5.2.4 Vanuatu TFP Growth Pattern……………………………………………….. 81 5.2.5 New Caledonia TFP Growth Pattern………………………………………....82.3 Countries on the Frontier 84.4 Regression Analysis Results. 85hapter 6 Conclusion 92.1 The Study Approach 92.2 The results 92.3 Policy implications 94.4 Implications to the Study 96.5 Further Areas for Research 96eferences 97ppendix 10