Total Factor Productivity Growth in the Philippine Coconut and Sugarcane Sub-sectors

The study determined the factors that influence production and farm-level technical efficiency, and identified the sources of total factor productivity (TFP) growth in the coconut and sugarcane sub-sectors in selected areas in the Philippines using panel data. TFP growth was decomposed into technical change, scale efficiency change, and change in technical efficiency.

Based on the results of the stochastic production frontier analysis, farm area, number of bearing trees, labor, and variety exhibited positive and significant effects on coconut farm output in Davao City. On the other hand, land, labor, fertilizers, lime application, and farm topography were the significant factors that had the most contribution to the sugarcane farm output in Luzon and Mindanao. The factors which significantly affected technical inefficiency of coconut farmers were education, training, credit, and intercropping practice;

whereas the important determinants of technical inefficiency of sugarcane producers in the study areas were educational attainment and tenure status of farm operators, size of the farm, and the general cultural and socioeconomic conditions in milling districts.

On the average, TFP growth in the coconut sub-sector was negative (–3.62%/year) due to the negative growth rates in the three TFP components. In contrast, the average annual TFP growth in the sugarcane sub-sector was positive (1.99%). The major sources of this modest TFP growth were technical efficiency improvement and technological change.