Total Factor Productivity and Sources of Growth in Peruvian Agriculture

(1950 – 2010)

Jackeline Velazco
University of Barcelona
PhD Program in Economic History

May, 2015

Draft
Not for Quotation without Author Permission

Abstract

The aim of the paper is to analyse the factors behind the growth dynamics in Peruvian
agriculture during 1950-2010. Two related analysis were carried out. The first one consisted
of the estimation of the total factor productivity (TFP, hereafter) and the second one was the
identification of its determinants. Regarding the first analysis, the sources of growth of
agricultural output were identified in terms of the contribution of inputs and changes in
productivity. In doing this, a Cobb-Douglas production function with constant returns to
scale was assumed. The inputs considered were labour, land, machinery (number of
tractors), livestock and fertiliser.
Findings show a poor TFP performance during 1950 – 1975. This situation changed after the
1990s, when productivity in Peruvian agriculture recovered significantly. With respect to the
second analysis of the paper, the estimation of the determinants of TFP, time series
econometric techniques were used. One cointegration vector was identified; exhibiting trade
openness, macroeconomic stability (inflation rate) and government expenditure allocated to
agricultural sector a negative impact on TFP. On the other hand, GDP per capita, human
capital (school enrollment ratio) and structural reform index showed a positive effect on
TFP.

Key words: Peru, agricultural productivity, total factor productivity

JEL codes: N56, O47, O54

1
Total Factor Productivity and Sources of Growth in Peruvian Agriculture
(1950 – 2010)

1.- Introduction
Throughout its history, Peru, being a small and open economy, has experienced cycles of
crises and recoveries usually tied to international market fluctuations. A main feature of the
Peruvian economy has been its primary-good exporter and manufactured-product importer
profile. Development strategy models have evolved from models of primary export
diversification to industrialisation and to a non-traditional export promotion model.

A key characteristic of Peru's agricultural sector is that it accounts for a high proportion of
the national workforce. The 2007 census shows that the EAP (Economically Active
Population) in agriculture represent 24.7 percent of the national EAP (INEI, 2008). On the
other hand, agricultural production only accounts for some 9.2 percent of total GDP, with a
downward trend since 1950. Hence, there is the need to raise the yield of production factors,
given that the sector is faced with the triple challenge of increasing national food supply,
reducing poverty and providing growth opportunities for agribusiness and exports.

Given this scenario, the aim of the paper is twofold: a) to identify the sources of growth of
agricultural output through the estimation of the total factor productivity (TFP) for the
period 1950-2010, and, b) to estimate the determinants of the TFP. A substantial empirical
literature has estimated TFP in the agricultural sector using different approaches such as
Cobb-Douglas and translog production functions, the stochastic frontier analysis and the
Data Envelopment Analysis (DEA). The Peruvian case has been analysed, in a comparative
international setting, as part of a large sample of countries (Pfeiffer, 2003; Bravo-Ortega and
Lederman, 2004; Coello and Rao, 2005; Nin-Pratt and Yu, 2009; Heady et al., 2010; Ludena
et al., 2010; Avila et al., 2010; Fuglie, 2012, among others).
Regarding the first aim, the sources of growth of agricultural output have been identified in
terms of the contribution of inputs and changes in productivity. In doing this, a Cobb-
Douglas production function with constant returns to scale was assumed. The inputs
considered are labour, land, machinery (number of tractors), livestock and fertiliser. Data
was obtained from national statistical sources (INEI), FAOSTAT, Groningen Growth and
Development Center 10-industry database and the International Fertiliser Industry
Association.

Five sub-periods, which coincide with major economic policy measures undertaken during
the study period, were considered for the analysis of the TFP trend. The selected sub-periods
are 1950-1959, 1960-1975, 1976-1990, 1991-2000 and 2001-2010. Findings show a poor
TFP performance during the first sub-period, followed by a recovery during the second and
third periods and an outstanding performance since the 1990s.

With respect to the second aim of the paper, the estimation of the determinants of TFP, time
series econometric techniques were used. Following the literature on the subject, among the
determinants of TFP are trade openness, macroeconomic stability (inflation rate),
government expenditure allocated to the agricultural sector, human capital (school
enrollment ratio), GDP per-capita and institutional factors captured in a Structural Reform
index.

This paper is organised as follows. Section two outlines the main trends in Peruvian
agriculture. Section three explains the estimation of the total factor productivity. Section
four deals with the identification of the determinants of the TFP and section five concludes.
2
2.- An Overview of Peruvian Agriculture

Regarding the role of policy on agricultural performance in Peru, it is important to note that
the 1950s saw a change in pattern of economic growth in Peru and the emergence of new
export sectors such as mining and fisheries. The Government encouraged a process of
industrial import substitution with significant foreign investment. Macro-economic policy to
promote domestic industrial growth created an environment that was hostile to agricultural
development, with lower agricultural prices, profitability and dynamism. Given this context,
agrarian policy under the military government of 1969-1979 had two central themes:
agrarian reform and low-cost urban supply (Alvarez, 1983).

The APRA1 government that took power in 1985 viewed the agrarian problem as one of low
agricultural profitability and introduced a series of measures to raise farm prices, lower costs
and increase productivity. Large sums were allocated to subsidise credit and basic inputs,
such as fertiliser and pesticide. The results were good until 1987 when the symptoms of
failed economic management affected agricultural performance. The leading beneficiaries of
this policy were the modern agricultural holdings in the coastal and rainforest regions. The
coastal region accounted for 74.1 percent of fertiliser sales and subsidised credit was
overwhelmingly directed towards coastal and rainforest crops such as cotton and yellow flint
maize. Fertiliser prices fell in real terms until the end of 1988. The highland benefited
minimally from these policies (Velazco, Velazco and Sulen 1990).

The populist policies of 1985 to 1990 increased aggregate demand and pushed up imports,
triggering a fiscal deficit in 1988/89 and a balance of payments crisis that in turn caused
hyperinflation and recession. To quote Gonzales (1996:25), "the impact on agriculture and
smallholders was negative in this period since what had been gained in the first years of the
APRA government was lost in the last two years, culminating in greater impoverishment
than had existed in 1985".

The programme of stabilisation introduced in the early 1990s by Alberto Fujimori to bring
inflation under control was based on restricted control of monetary variables, readjustment
of prices and public tariffs, elimination of subsidies, increased taxation, reduction of public
expenditure and the free movement of exchange and interest rates. These measures were
underpinned by a package of structural reforms aimed at efficient resource management
through market deregulation and liberalisation and a reduced entrepreneurial role of the state
through privatisation and the closure of monopoly concerns. The latter included PESCA
PERU (a fish corporation), CPV (Compañía Peruana de Vapores), ENCI and ECASA
(Empresa Comercializadora de Arroz Sociedad Anónima) (León, 1994; Mendoza, 1992;
Dancourt and Mendoza, 1994).

Since 2001, Peru has experienced a process of continuous economic growth. Government
policies implemented by Presidents Toledo (2001-2006) and García (in power during 2006 -
2011) continued the pro-market oriented policies of their predecessors. Peru’s economy was
one of the strongest in Latin America. It has experienced continuously high GDP growth
rates (over 3% since 2000, and over 5 percent since 2004) and successful macroeconomic
indicators. These results show a dramatic change overall, compared to the economic
outcomes for the 1980s and before (INEI, various years).

1
APRA (Alianza Popular Revolucionaria Americana), Peruvian political party founded in the 1920s by Víctor
Raúl Haya de la Torre and forming government for the first time in 1985-1990 under Alan García Pérez.
3
Non-traditional export crops have increased their acreage due to increased international
demand and the promotion of laws for the sector, such as the Law for Promotion of the
Agricultural Sector, which offers a range of incentives to companies. Furthermore,
environmental conditions have been optimal for crop expansion, there has been a significant
development in transport infrastructure that allows the transfer of the products in the best
conditions, and the implementation of Free Trade Agreements (FTA) between Peru and the
rest of the world, such as the FTA with the United States, Thailand, Singapore, China, and
other countries (PROINVERSIÓN, 2007). The exportable supply is provided not only by
large companies but also for small, medium and large producers who establish various forms
of articulation with big agro-business. Some companies are vertically integrated with their
suppliers of crops through contracts where monitoring of agricultural activities, financing
and conditions of sale (quantity and quality of the product, price, place of delivery of the
product and penalties) are established.

The presentation of information about the long-term performance of the agricultural sector
proceeds. Table 1 shows the distribution of real GDP and employment according to
economic sectors. In 1961, agriculture represented 12.3% of total GDP, but its share has
fallen to 9.2% in 2007. Nevertheless, the sector is still an important source of employment,
being engaged around 25% of total employment.

Table 1. Peru: Distribution of GDP, at 1994 Nuevos Soles constant prices, and
employment by sector (%)

1961 1972 1981 1993 2007

Agriculture 12,3 9,2 7,5 9,1 9,2
Mining 4,2 3,2 4,8 5,2 6,5
Manufacturing 19,3 19,9 19,1 17,1 17,3
Electricity 0,8 1,0 1,6 2,1 2,3
Construction 4,4 4,0 4,5 5,1 6,2
Commerce 16,4 18,1 18,1 15,7 16,2
Services 42,5 44,5 44,4 45,7 42,4

Distribution of employment by sector (%)

Agriculture 51,9 43,1 38,5 30,6 24,7
Mining 2,2 1,5 2,0 1,2 1,4
Manufacturing 13,7 13,8 11,8 12,9 9,6
Electricity 0,3 0,2 0,4 0,4 0,2
Construction 3,5 4,9 4,2 4,2 5,7
Commerce 9,4 11,4 13,4 19,3 18,9
Services 19,0 25,1 29,7 31,5 39,5
Source: GDP data from El Banco Cetral de Reserva and employment data from the Population and Housing
National Census (INEI) from 1961, 1972, 1981, 1993 and 2007.

Figure 1 shows that over a period of 58 years (1950-2008), the share of agriculture in GDP
has declined.

4
 Figure 1

Studies on sectoral labour productivity offer the same conclusion. Agriculture in Peru is the
sector with the lowest productivity (Jurado, 2001; Garcia 2001; Chacaltana, 2005;
Chacaltana and Yamada, 2009; World Bank, 2010). The long-term comparison of labour
productivity between the agricultural and non-agricultural sectors is presented in Table 2.
While confirming that agriculture has the lowest labour productivity levels, even below the
national average, it is undeniable that this variable is more dynamic since the beginning of
the 1990s.

Table 2. Estimations of Labour Productivity by Sectoral Composition (1994 Nuevos

Soles prices)

1961 1972 1981 1993 2007

Agriculture 2,777 3,772 3,456 3,542 6,060
Mining 22,268 37,742 41,801 51,930 77,163
Manufacturing 16,434 25,446 28,970 15,692 29,226
Electricity 32,436 82,042 76,735 70,185 176,496
Construction 14,819 14,522 19,228 14,429 17,419
Commerce 20,420 27,963 24,059 9,677 13,859
Services 26,047 31,315 26,700 17,266 17,406

Total 11,673 17,639 17,842 11,888 16,208

Source: Author’s calculation based on Banco Central de Reserva data and employment data from the
Population and Housing National Census (INEI) from 1961, 1972, 1981, 1993 and 2007.

5
3.- Estimating Total Factor Productivity in Agriculture

The results of the estimation of total factor productivity (TFP) of Peruvian agriculture for
1950-2010 are presented in this section. The objective of this approach is to identify the
sources of growth of the agricultural product based on the contribution of factors and
changes in productivity.

3.1 Measuring TFP

TFP is defined as the ratio between the total output (Y) and total inputs (X). Thus TFP can
be represented as:

TFP = Y/X (1)

TFP changes over time are estimated by comparing the rate of change of the output with the
rate of change of inputs. Equation (1) in logarithm is expressed as
:
d ln( PTF ) d ln(Y ) d ln( X )
= − (2)
dt dt dt

Assuming a Cobb-Douglas production function with constant returns to scale, equation (2)
becomes:

 PTFt   Y   X 
ln  = ln t  = −∑ S j ln j , t  (3)
X 
 PTFt −1   Yt −1  j  j , t −1 

Where Sj is the cost structure of the input j.

The inputs considered are labour, land, machinery, stock of cattle and fertiliser. A
description of the variables is found in the Appendix 1. The Hodrick-Prescott filter was used
with the purpose of eliminating from the output series the effect of short-term fluctuations
due to weather or other events, Figure A1 compares the series with original data and the
resulting after applying the filter.

Although there are informational shortcomings in, for example, the summation of fertiliser
variables, the calculation of agricultural EAP and the failure to allow for machinery
depreciation, the estimated functions do give an indication of the relative importance of
these factors in agricultural production.

In order to assess the robustness of the estimates, two scenarios were taken into account. The
first one consists of assuming constant input shares for the whole period of analysis. The
weights correspond to the case of Brazil reported by Avila and Evenson (1995). The weights
are 0.43 for labour; 0.22 for the land; 0.14 for the stock of cattle; 0.14 for machinery and
0.07 for fertilisers. On the other hand, the second alternative corresponds to variable input
shares by decades. Input shares were calculated from the Brazilian Agricultural Census’
1970, 1985, 1996 and 2006 and reported by Fuglie (2012). Velazco (2001) estimated, using
a Cobb-Douglas funcion, the shares of land, labour, machinery and fertiliser for the period
1970-1995. The relative importance of those input shares are similar to the Brazilian
weights, these being the prefered ones for the application to the Peruvian case. Table 3
shows the factor shares used for the variable input share scenario.

6
Table 3. Variable Input Shares
Input Factor shares
1950-70 1971-80 1981-90 1991-00 2001-10
Labour 0.434 0.434 0.443 0.415 0.373
Land 0.342 0.342 0.159 0.115 0.083
Livestock 0.126 0.126 0.168 0.181 0.129
Tractor 0.071 0.071 0.110 0.177 0.160
Fertiliser 0.027 0.027 0.120 0.112 0.255
Source: Fuglie (2012)

3.2 Estimation of TFP for Peruvian Agriculture in previous studies

There is significant empirical literature on agricultural TFP estimates made at the level of
various regions, groups of countries and individual countries. In the case of Latin America,
although there are few studies for individual countries, estimates were carried out for Chile
(Olavaria, et al., 2004), Argentina (Lema and Brescia, 2001), Mexico (Fernandez-Cornejo
and Shumway, 1997), Uruguay (Arancet and Calvete, 2003), Colombia (Romano, 1993),
Brazil (Rada, et al, 2009; Gasques et al, 2008 and 2012, among others), Honduras and
Panama (Ebata, 2011). These studies estimate, using annual and aggregated data, the
contribution of productive factors and TFP in explaining the performance of agricultural
output. The discussion on the evolution of TFP is often framed in decades, periods of
government or development strategies implemented in the country.

In general, studies have considered Peru as part of a sample of countries to estimate TFP.
Main findings, in terms of methods, period of analysis and estimates of the TFP growth rate,
are summarised in Table 4. Different approaches were implemented, such as translog
production function, the stochastic frontier analysis, the Data Envelopment Analysis (DEA),
among others. The review reveals that methods, measures of variables and model
specifications used to estimate productivity growth could affect its estimation. As can be
seen, the average annual TFP growth derived from these studies varies between -0.99 and
3.46.

Table 4. Estimation of TFP in Peruvian Agriculture

Authors Methodology Period TFP growth rate

Fuglie (2012) Cobb-Douglas 1961-1970 0,85
Production function 1971-1980 -0,99
1981-1990 -0,02
1991-2000 3,11
2001-2009 3,46

Avila et al. (2010) Tornqvist-Theil 1961-2001 1,17

Ludena (2010) Malmquist – DEA* 1961-2007

1,2

Heady et al. (2010) Stochastic Frontier 1970-1985 1,8

Analysis 1986-2001 2,5

Nin-Pratt y Yu (2009) Malmquist 1984-2003 2,55

Coello y Rao (2005) DEA 1980-2001 1,015

7
 Bravo-Ortega y Translog production 1961-2000 1,36
Lederman (2004) function

Pfeiffer (2003) Stochastic Frontier 1972-2000 2,79

Malmquist 1972-2000 1,40
DEA : Data envelopment analysis. Author’s own elaboration

3.3 Evolution of Production and Use of Productive Factors, 1950-2010

Table 5 summarises the annual average growth rate of inputs and output according to sub-
periods of analysis. Five sub-periods, which coincide with major economic policy measures
undertaken during the study period, were considered for the analysis of the TFP trend. The
selected sub-periods are 1950-1959, 1960-1975, 1976-1990, 1991-2000 and 2001-2010.
Export-oriented economic policies were carried out in the first sub-period. The second
period is characterised by the implementation of the Import Substitution Industrialisation
(ISI) policies. The third period was a transition towards neoliberal policies, seeking to
dismantle the protectionist policies and encouraging trade liberalisation (Rojas, 1997).
Furthermore, it coincided with the external debt crisis, the expansion of political violence
and the failure of the populist government of Garcia (1985-1990), ending in hyperinflation
and recession. The next period covered the implementation of the stabilisation programme
and structural reforms aimed at reducing the role of government in the economy. The last
period is related to a scenario of steady economic expansion2.

Table 5. Agricultural ouput and inputs growth by periods, 1950-2010

Agricultural Net Arable Land and Active Livestock Units Agricultural Fertilizers use
Production Permanent Crops Population in Tractors
(1994=100), New Agriculture
Soles
Periods
Average Annual Thousand % Thousand % Thousand % Units % Thousand %
period growth hectares people LU tonnes
rate
1950-59 3,358 1.87 1,692 0.83 1,655 1.19 11,895 1.78 4,985 11.84 84.61 -.042
1960-75 4,845 2.52 2,661 4.01 1,861 0.76 14,187 0.52 9,490 3.80 93.25 2.85
1976-90 6,187 0.99 3,642 1.26 2,252 1.57 13,857 -0.05 12,090 0.62 135.33 3.85
1991-01 8,501 5.11 4,633 2.78 2,694 0.94 14,983 1.53 13,081 0.34 186.50 16.35
2002-10 13,288 4.06 5,084 1.51 2,989 0.88 18,098 1.67 13,368 0.30 313.78 1.45
1950-10 6,836 2.53 3,456 2.09 2,240 1.01 14,450 0.86 10,611 2.97 151.53 4.34
Source: Authors’ own elaboration

As expected, the lowest output growth rate was for the economic crisis period, 1976-1990,
showing an increasing dynamism after that. Regarding the input trends, the higher growth
rates were associated with arable land and permanent crops (2.09% for the entire period),
fertiliser use (4.3%), and use of agricultural tractors (2.97%). On the other hand, the lowest
rate of growth corresponds to the number of the economically active population in
agriculture (1.01%) and livestock units (0.86%).

2
In order to confirm the selected periods of analysis, it was performed the test of structural change, proposed
by Bai and Perron (2003), to the agricultural production serie. Outcomes identify structural breaks in 1960,
1993 and 2002.
8
3.4 Findings

Figures 2 and 3 shows the evolution of the output index, input index and TFP index for
Peruvian agriculture for the period 1950-2010. It is noted that the expansion of the
production until the early 1990s has been accompanied by greater dynamism of the factors
of production. Thereafter, TFP shows a trend closer to the output.

Figure 2. Evolution of Output Index, Input Index and TFP Index in the Peruvian
Agriculture, 1950-2010
(Assuming constant input shares)

9
 Figure 3. Evolution of Output Index, Input Index and TFP Index in the Peruvian
Agriculture, 1950-2010
(Assuming variable input shares)

Table 6 and Table 7 show the sources of agricultural growth for the periods of analysis. The
contribution of the TFP index and the input index (land, livestock, labour, machinery and
fertilisers) is estimated. Outcomes with constant input shares and variable input shares
provide similar trends, showing some discrepancy only in the 1976-1990 period. In general,
results denote that the TFP exhibits a poor performance during 1950-1959, output being
explained largely by input accumulation.The ISI period, 1960-1975, was characterised by a
recovery in the PTF contribution to output growth, ranging from 18.18% to 20.08%. During
the next sub-period, 1976-1990, external debt crisis and economic crisis expressed in
hyperinflation, undermined the output growth. This was mainly explained by input
accumulation, being 70% according to the constant input share scenario and 100% for the
variable input shares scenario. The following two-subperiods witnessed a remarkable output
growth. From the 1990s, productivity in Peruvian agriculture recovered significantly,
growing at an annual average growth rate of 3.09% and 3.33% during the fourth and fifth
sub-periods respectively for the constant input share context and 1.81% and 3.32% for the
variable input share scenario.

10
 Table 6. Factor Accumulation and Productivity Contributions to Output Growth,
1950-2010 (annual average growth rate in percent)
(With constant input shares)
Output Input TFP TPF relative
National context growth growth growth to output
Periods (%) (%) (%)

1950-1959 Export oriented policies 1.67 3.03 -1.36 -81.44

1960-1975 ISI policies 2.64 2.16 0.48 18.18
1976-1990 Internal/debt crisis 1.17 0.90 0.27 23.08
1991-2001 Structural Adjustment policies 5.10 2.01 3.09 60.59
2002-2010 Economic expansion 4.26 0.93 3.33 78.17
All period
1950-2010 2.60 1.66 0.94 36.15
Source: Authors’ calculations

Table 7. Factor Accumulation and Productivity Contributions to Output Growth,

1950-2010 (annual average growth rate in percent)
(With variable input shares)
Output Input TFP TPF relative
National context growth growth growth to output
Periods (%) (%) (%)

1950-1959 Export oriented policies 1.67 2.08 -0.41 -24.55

1960-1975 ISI policies 2.64 2.11 0.53 20.08
1976-1990 Internal/debt crisis 1.17 1.19 -0.02 -1.71
1991-2001 Structural Adjustment policies 5.10 3.29 1.81 35.49
2002-2010 Economic expansion 4.26 0.94 3.32 77.93
All period
1950-2010 2.60 1.79 0.81 31.15
Source: Authors’ calculations

Kay (1994) argues, from a Latin American perspective, that since the 1980s, when changing
an import substitution strategy to another facing out, the link between agriculture and the
world market has been strengthened. This trend has been consolidated with the
implementation of structural adjustment programmes, prioritising the expansion of
agricultural exports as an alternative to the permanent problem of foreign exchange
shortages. Thus, as part of the process of globalisation of the economy, mainly in the Latin
American context, transnational agricultural corporations and local investors have appeared.
With the use of new technology that allows improved storage systems, agro-processing,
storage, transportation, communications and industrial organisation, these companies have
achieved advantages in the production of fruits, vegetables and flowers. Peru is not an
exception to this process. The structural reforms of the 1990s, and in particular government
policies to promote agribusiness development, created favourable conditions for the
expansion and consolidation of non-traditional agricultural exports.

Consequently, important changes have taken place in Peruvian agriculture in the last two
decades. These have been due to the increasing openness to international markets (currently
the country has free trade agreements with various countries). Other factors are related to the
growing international demand for healthy food quality, the incorporation of new land for
farming, the growing interest in bio-fuels, the increased income of Peruvians who demand a

11
more varied and quality food supply and the expansion of private investment in agriculture,
among other factors (Velazco and Velazco, 2012).

The 1990s was a period of fundamental change in the performance of agriculture. The
implementation of the stabilisation programme and structural reforms by the State changed
the institutional environment and the conditions in which agricultural producers participate
in market relations. A key point that emerges in the context of the reforms is the explicit
policy of encouraging investment in the sector, declaring of national interest the
development of agribusiness. The role of the State changed in this new context, regulating its
participation in promoting and guiding economic activities. Therefore, the State plays a
subsidiary role and private action is essential to drive development (von Hesse, 2000;
Eguren, 2003). Among the policies that directly favoured the agricultural sector are
highlighted the free trade in agricultural goods and factors of production and the selling of
state monopolies. Furthermore, the liberalisation of factor markets (water, land, labour,
inputs, credit), reduced income tax, reduced tariffs on imports, the opening of new export
markets with the signing of bilateral free trade agreements, among others, were implemented
(Velazco and Velazco, 2012).

4.- Explaining TFP Growth in Peruvian Agriculture

A few studies estimate the determinants of TFP highlighting significant variables as

investment in agricultural research, international technology transfer, macroeconomic
stability and trade liberalization (Fernandez-Cornejo and Shumway, 1997; Arancet and
Calvete, 2003; Headey et al., 2010; Dias Avila et al., 2010).

The econometric analysis consists of estimating an equation for TFP growth based on the
following set of variables:

a) Human capital expressed as a labour quality index, computed according to the

methodology applied by Céspedes and Ramírez-Roldán (2014) for the estimation of
the TFP in Peru. The index is defined as:

H = ∑ WjEj
j

H is the weighted average of the shares of population, E, with educational level j,

where Wj is a weight defined as the social return to educational level j. This variable
is taken from Psacharopoulos (1994) for the following seven educational levels: no
education, imcomplete primary education, completed primary education, incomplete
secondary education, completed secondary education, incomplete college education
and completed college education. The variable E, available since 1950, is obtained
from Barro and Lee (2010). In spite of the fact that this variable is not specific to
agricultural workers, it is a good proxy for the estimation aim, bearing in mind that
the average schooling of agricultural workers is lower than the average schooling for
all workers.

b) Trade openness is measured as the share of exports and imports in GDP. It is the
value of all goods and services imported and exported as percentage of GDP. The
index was computed using data from the on-line data base of the Central Bank of
Peru (www.bcrp.gob.pe).

c) Public investment allocated to the agriculture sector in Nuevos Soles (1994 base
year). This series was created using diverse sources: Elias (1981) reports information

12
 from 1950- 1980, Velazco (2001) from 1970 – 1994 and Central Bank of Peru
Annual Report from 1995 - 2010.

d) GDP percapita in Nuevos Soles is expressed in real terms (1994 base year). Data
obtained from the Central Bank of Peru database.

e) Macroeconomic stability captured by the inflation rate, data available in the Central
Bank of Peru database.

f) A Structural reforms index is a set of indexes that attempt to measure how favorable
trade, financial, tax, privatization and labor policies are for the free working of
market. Escaith and Paunovic (2004) computed the indexes for the period 1970-
2000. Lora (2012) estimated a similar index for 1985-2009. Escaith and Paunovic
index was updated up to 2010 using the rate of growth of Lora’s index.

Thus, the following equation to be estimated is:

TFP = βo + β1HumanCapital + β2TradeOpeness + β3Investment + β4GDPpc + β5Inflation +

β6StructuralReform + µ

Appendix 2 shows the variables in their original values, in log and in first differences.

4.1 Unit Root Tests for selected Variables

Conventional unit-root procedures have low power when structural breaks in data are
ignored. For the sake of comparison, tests assuming structural breaks in the series and tests
ignoring them respectively were implemented. For the latter, the conventional test of
Augmented Dick and Fuller (ADF) and PPerron were considered. For the former tests, it was
performed the LS (2003) minimum Lagrange Multiplier (LM) unit-root tests to determine
structural breaks endogenously3. The test determines the location of one or two breaks in
level and trend and tests the null of a unit-root.
Tables 8 and Appendix 3 show the results of the above-mentioned tests for the series both in
level (in log values) and first differences. It can be observed, according to the stationary test,
that the variable levels are integrated in single order, I(1), was not rejected. Moreover, the
null hypothesis that the first differences have unit roots was rejected.

3
Additionally, the Clemente-Montañés-Reyes tests for unit roots allowing for structural change were also
carried out, providing similar results.
13
Table 8. Unit Root Tests for Selected Variables
ADF P. Perron
Levels (in Lags test Decision Z (rho) Z (t) Decision
logs)
TPF1 2 -0.20 NS -0.736 -0.405 NS
TPF2 10 -0.585 NS -1.064 -0.314 NS
Inflation 0 -1.580 NS -6.203 -1.664 NS
Human 6 -2.129 NS -9.935 -2.603 NS
Capital
Trade 1 -1.533 NS -6.836 -1.643 NS
openness
Pubic 9 -1.911 NS -5.977 -2.012 NS
investment
GDPpc 10 -1.901 NS -6.548 -1.797 NS
Structural 5 -2.504 NS -9.495 -2.487 NS
reform
First differences
TPF1 0 -3.820 S -23.028 -3.820 S
TPF2 9 -1.862 NS -40.176 -5.771 S
Inflation 0 -6.774 S -52.888 -6.774 S
Human 10 -2.342 S -36.573 -4.772 S
Capital
Trade 0 -7.770 S -60.781 -7.770 S
openness
Pubic 8 -1.562* S -53.826 -7.984 S
investment
GDPpc 0 -4.372 S -31.944 -4.581 S
Structural 5 -2.116 S -23.523 -4.205 S
reform
*sig at 10%. Note: S is stationary. NS is non-stationary.

Confirming that the time series data was stationary in first differences, the TFP determinants
were estimated using the cointegration method suggested by Johansen (1988). Under this
methodology, two or more variables can be considered to be in long-term equilibrium if they
move closely and in parallel over time, even though they may in the short-run move in
opposite directions. For this reason, the technique is particularly useful to identify the
determining factors of the TFP. The long-term relationship is known as the cointegration
vector.

Given that the Structural Reform index is available only for the period 1970-2010, two set of
models were implemented. The first one, covering the full period of analysis, considers as
exogenous variables the openness ratio, inflation rate, human capital, public investment in
agriculture and GDP per-capita. The second model assesses the relevance of the Structural
Reform index as determinant of the TFP.

4.2 Cointegration tests and Determinants of TFP

The Trace test indicated one cointegration vector using Johansen and Juselius' (1990)
criterion and one cointegration vector using the maximum characteristic value test. The
results from this analysis, for the TFP considering either constant or variable input shares,
are presented in Tables 9 and 10, respectively.

14
Table 9. Cointegration with TFP (assuming constant input shares)

Table 10. Cointegration with TFP (assuming variable input shares)

The resulting normalised cointegration vectors provide an estimate of the relative

contribution of the selected variables to Peru's agricultural TFP. Overall, these results,
suggest that TFP is positive determined by human capital, GDP per capita, and negatively
influenced by degree of openness, public investment in agriculture and inflation rate.
Furthermore, the structural reforms index has a positive effect on TFP. Serial correlation in
the residuals of the selected models were checked using the ADF test. In all cases, the nill
hypothesis was rejected, implying the existence of cointegration.

The normalized cointegration vectors are:

a) LPTF1 = 3.625 + 0.793HumanCapital – 0.069TradeOpeness - 0.119Investment +

0.560GDPpc – 0.032Inflation
b) LPTF2 = 2.442 + 0.106HumanCapital – 0.445TradeOpeness - 0.085Investment +
1.035GDPpc – 0.013Inflation
15
 c) LPTF1 = - 19.168 + 19.17StructuralReform
d) LPTF2 = -5.462 + 1.112StructuralReform

Turning to the human capital variable, the literature on the determinants of agricultural
innovation emphasise socio-economic factors such as farm size, risk, human capital,
availability of labour, credit and form of land tenure (Feder, Just and Zilberman, 1982;
Feder, 1982; Feder and Slade, 1984). In the southern highlands of Peru, Figueroa (1986) and
Cotlear (1989) identify education as a key factor behind the adoption of new technologies.
Recent studies were carried out on the factors influencing adoption of technologies, and
innovation and technological capacity in Peruvian agriculture based on a comparative
analysis of the 1994 and 2012 Farm Census. Findings corroborate the key role played by
farmer's education as well as farm size, access to credit and distance to the markets (Tello,
2014; and Kim, 2014).

The 1972, 1994 and 2013 Peru Farm Census report that the percentage of farmers without
education decreased as farm size increased. Furthermore, the proportion of uneducated
farmers accounted for 27.48 % of farms in 1972, 20.4 % in 1994 and 15.1% in 2013. In spite
of the fact that the percentage of farmers with secondary and higher education have
increased across the census, the share of farmers having only a primary education is still
high, reaching 51.8% in 2013. This fact can be seen as an obstacle to the delivery of
extension programmes and technology transfer, which require specialised knowledge on the
part of the farmer.

With regard to innovation of selected commodities, considerable progress was made in the
research and generation of improved varieties. During the 1980s, The Agricultural
University of La Molina (UNALM), the National Institute of Agricultural Research (INIA)
and the International Potato Centre (CIP) were all actively engaged in improving existing
technologies and adapting them to national agricultural conditions (Velazco, 2001).
However, there are still important technological bottlenecks. One problem restricting
innovation potential is inadequate government spending on research and technology transfer.
According to the Farm Census, farmers access to technical assistance and training reached
only 3.41% of total farmers in 1972, 9.33% in 1994 and 7.3% in 2012 (Velazco, 2001; INEI,
2012). As a result of the stabilization and structural adjustment and structural programmes
implemented in the 1990s, public expenditure in agricultural research experienced sharp
cuts. Private sector agencies emerged as the main providers of technical assistance and
engagement in agricultural research, resulting in a partial dismantling of the public
agricultural extension service. At the beginning of the 1990s, the Peruvian government
concentrated its direct involvement in agricultural innovation to that of agricultural research
only. Therefore, technology diffusion was left to the private sector and civil society ( World
Bank, 2006).

Focusing on the negative relationship between public investment in agriculture and TFP, it is
important to note that public investment in Peru has targeted the agricultural sector since the
beginning of the XX century. This is because the mainstay of economic growth was export-
based agriculture in the coastal region. The primary concern was to make sure that this
region received sufficient water, thus removing a constraint to expanding the area under
cultivation. Therefore, public investment in irrigation in 1905 accounted for 8.7% of the
total, reaching 18.62% in 1912, a trend that continued in the 1920s. This investment was
financed by fiscal revenue from a progressive income tax and taxation on mineral export
earnings. Another important source was the policy of external debt (Portocarrero, Beltrán
and Zimmerman, 1988).

16
In general, the largest share of public investment in agriculture was directed towards
irrigation in the coastal region. Between 1950 and 1980, 90 percent of irrigation investment
was directed to the coastal region and the rest to the highlands. Some 76% of investment in
the coastal region between 1978 and 1982 was concentrated on three major irrigation
projects at Majes, Chira-Piura and Tinajones (Guerra, 1986). Public agricultural investment
has been a key policy instrument employed to promote the expansion of area under
cultivation and to establish and maintain agricultural infrastructure. Analysis of the
allocation of public investment from 1971 to 1995 indicates that on average 75.8% of funds
were used to expand area under cultivation and that investment in technology transfer and
agricultural development was limited and piecemeal (IICA, 1990; and MAG, 1992).

Since the 1990s, government policies have promoted private investment in irrigation projects
for the expansion of the agricultural frontier in uncultivated land with agricultural potential
belonging to the State, mainly located on the coast. It was declared a national need to
promote private investment in fallow land. Several of these lands have been purchased by
the largest exporting companies, as in the case of Olmos and Chavimochic4. Eguren (2014)
estimated the magnitude of State subsidies in major irrigation projects on the coast,
privatised mainly since 1990. The evidence is very clear in stating that there was a large
subsidy on investment in these projects. It was estimated that the revenues earned by the
State due to the sale of the new lands and other goods and services cover only 7% of public
investment carried out on these projects. That is, there was a subsidy of 93% total project
cost.

The above-mentioned could justify that the relationship between public investment and TFP
in agriculture is more related to the expansion of the agricultural frontier, increased land
input, and not with any sigificant impact on TFP. It could be suggested that the composition
of public investment really matters for defining any potential impact on TFP. Taking into
account that TFP is the difference between output growth and input growth, public
investment allocated massively to expand one input, land in the Peruvian case, is expected
an increase in factor accumulation rather than changes in productivity. That is, the
continuing bias of governments to expand the agricultural frontier explains the inverse
relationship between public investment and TFP. However, the effect of public investment
on TFP can occur through other mechanisms. Velazco (2001) found, using the method of
Granger causality, a complementarity relationship between public and private investment in
agriculture for the period 1970-1995. More precisely, support was found for the existence of
causality from public investment to private investment. That is, greater public investment or
subsidy, in this case concentrated on irrigation, creates conditions for the expansion of
private investment.

This scenario can be extrapolated to what happened in agriculture since the 1990s. That is,
the government creates the conditions for the private sector to expand the irrigation
infrastructure for new export products and provide farmers with measures that brought about
a reduction in production costs (labour, inputs, taxes, tariffs). It also facilitates access to new
export markets through the implementation of various free trade agreements. This means
that producers need to make improvements in their production techniques and business
management that allows them to compete in international markets. It can be suggested that
the combined effect of these measures have caused a significant increase in TFP since the
1990s.
A new feature of agricultural export over the past two decades is its export market and
output diversification. Hence, it is leaving aside traditional products, such as cotton and
sugar, and a new range of commodities have emerged, such as flowers, fruits and vegetables.

4
A discussion of the auction processes of agricultural land is found in Hernandez (2010).
17
These include the growth of asparagus, mango, grapes, avocado, artichoke, organic coffee,
cacao and paprika (Velazco and Velazco, 2013).

During the 1990s, along with the economic stabilisation programme and structural
adjustment, emergency social protection programmes were implemented to deal with
macroeconomic crises and with the impacts of stabilisation programmes themselves. The
dominant approach regarding social policy was that economic growth was the primary
mechanism for poverty reduction. Therefore, social policies focused on assisting the most
vulnerable segments of the population (the poor, the elderly, children, the disabled),
according to the principle of “targeting” and focusing, as opposed to universal access to
social protection. Thus, for example, within a poverty alleviation approach, the Fund for
Compensation and Social Development (FONCODES) was established in 1991 to assist the
rural poor. Furthermore, sustained economic growth since 2002, macroeconomic stability
and integration to the global economy, provided the financial resources to maintain these
policies.

Within this new framework, it is important to highlight the trend of public investmet in rural
areas. Bearing in mind that this investment was not mainly focused on enhancing
agricultural activities, direct and indirect effects on households’ incomes and agricultural
productivity could be expected. This investment consists of productive infrastructure
(irrigation, roads, electrification, telecommunications, marketing infrastructure, water and
sanitation); social infrastructure (education and health); direct producer support and social
assistance (Fort, 2014). An evaluation of the impact of rural public investment from regional
information for 2004-2012 was conducted by Fort (2014). The author finds improvements in
agricultural productivity as a result of rural public investment in irrigation, roads,
telecommunications and producer support. These outcomes have also a significant effect on
reducing rural poverty.

Melendez and Huaroto (2014) analyse the complementarity of rural infrastructure projects
such as the joint impact of investment in electrification and access to information technology
and communication. The authors find that access to both infrastructure projects raise the real
annual household income, the rate of female employment and the effective rate of school
attendance of children. Confirming the previous results, Webb (2013) reports two key
findings from a research carried out in 176 districts characterised by an extreme poverty
condition and high ruralty. The first one is the rapid growth of rural incomes since the 1990s.
The second finding is related to the densification and improvement of the road network and
other transport infrastructures, the growth of the vehicle fleet, the massification of cell
phones and internet, and reducing dispersion because of migration from rural to rural
villages, which now exceeds dynamism of cities. The increased accessibility has led to rapid
market integration of rural producers. According to the author, these phenomena constitute a
transformation of the rural economy in Peru.

As expected, a strong and significant negative relationship between TFP and the inflation
rate was found. This fact confirms the importance of macroeconomic stability in shaping the
performance of the agricultural sector. Several authors have noted how inflation and its
volatility can affect economic growth, emphasising the impact of inflation on the financial
system, the negative effect on capital accumulation and investment decisions of companies
due to increasing uncertainty (De Gregory, 1992; Pyndick and Solimano, 1993; Azariadis
and Smith, 1993).

With respect to the GDP percapita variable, it is observed that is positively associated with
TFP. This fact suggest that the interaction and complementarity between agriculture and the
whole economy are crucial for defining the perfomance of total factor productivity in
18
agriculture. A higher level of economic growth would be related to the provision of services,
inputs, financial resources, technology transfer, infraestructure and others factors that
enhance the growth of TFP. This result is in line with Martín-Retortillo and Pinilla (2014),
when the determinants of labour productivity in Europe was analised for the period 1950-
2005.

Trade openness or globalzation in general, could affect TFP in different ways. The flow of
knowledge across national borders is enhanced. Producers are facing potential larger markets
in spite of increasing competition from abroad. More integration boosts specialization
according to comparative advantage and affects the incentives for technological diffusion
(Grossman and Helpman, 2015). Trade openness, measured as the share of exports and
imports in GDP, exhibits a negative relationship with TFP. It seems that more market
integration means more opportunities for accessing to new markets and offering a more
diversified supply of commodities. Even more, it facilitates the accumulation of production
factor through the import of tractors, fertilizers and inputs required for the agricultural
production. It seems that access to international markets are more relevant for increase the
supply of farm inputs and could have limited impact in the diffusion of technology and,
therefore, on the TFP.

Finally, focusing on the structural reforms index, the positive impact on TFP performance
suggest that reforms implemented during the 1990s, and in particular policies to promote
agribusiness development, created favourable conditions for the expansion and consolidation
of non-traditional agricultural exports. Furthermore, the Coast region, due to climatic
conditions, access to better land, proximity to markets and infrastructure, was the leading
growth region.

5. Conclussions

The aim of the paper was to analyse the factors behind the growth dynamics in Peruvian
agriculture during 1950-2010. Two related analysis were carried out. The first consisted of
the estimation of the total factor productivity and the second one was the identification of its
determinants.
Regarding the first aim, the sources of growth of agricultural output were identified in terms
of the contribution of inputs and changes in productivity. In doing this, a Cobb-Douglas
production function with constant returns to scale was assumed. The inputs considered were
labour, land, machinery (number of tractors), livestock and fertiliser.

Findings show a poor TFP performance during 1950 – 1975. This situation changed after the
1990s, when productivity in Peruvian agriculture recovered significantly. With respect to the
second aim of the paper, the estimation of the determinants of TFP, time series econometric
techniques were used. One cointegration vector was identified; exhibiting trade openness,
macroeconomic stability (inflation rate) and government expenditure allocated to
agricultural sector a negative impact on TFP. On the other hand, GDP per capita, human
capital (school enrollment ratio) and structural reform index showed a positive effect on
TFP.

Throughout its history, Peru, being a small and open economy, has experienced cycles of
crises and recoveries usually tied to international market fluctuations. A main feature of the
Peruvian economy has been its primary-good exporter and manufactured-product importer
profile. Development strategy models have evolved from models of primary export
diversification to industrialisation and to a non-traditional export promotion model.

19
These strategies have marked the fate of agriculture. In an analysis of cointegration, Escobal
(1993) finds the existence of a cointegrating vector from 1917-1959, in which agriculture is
leading the growth process. The sector was one of the axes of accumulation of the economy
in the context of primary export model, both agricultural products (cotton and sugar) and
minerals. This situation changes radically when in the late 1950s a process of industrial
import substitution (ISI) was encouraged. Thereafter, agriculture becomes a sector whose
growth is contingent on the expansion of industry. The evidence discussed, in particular, the
growing trend of agricultural labour productivity and TFP performance, seeming to suggest
that in the 1990s there would have been another change in the way agriculture is linked to
the rest of the economy. This issue will be discused in the third essay, which will identify,
using a cointegration analysis, the long term relationship between agriculture and other
economic sectors from 1929 to 2012.

20
 Appendix 1
Sources of Data for estimating TFP (1950-2010)

Labour: It is the number of people employed in the agricultural sector. The source is the
database of the Groningen Growth and Development Center 10-industry for the period 1960-
2010. data base, available on the web: www.ggdc.net.

Livestock: The data for the number of head of cattle on the farm are available in the FAO
online - database, FAOSTAT (www.fao.org), and FAO yearbooks for the 1950s. Different
types of animals have been aggregated in livestock units following conversions suggested by
Hayami and Ruttan (1985:450). The aggregation weights used are: camels, 1.1; buffaloes,
horses and mules, 1.0; cattle and donkeys, 0.8; pigs, 0.2; sheep and goats, 0.1; poultry, 0.01.

Tractors:
It is the number of tractors in use in farming. The source is the FAOSTAT database. The
information is available for Peru until 2003. To project values up to 2010, the average
annual growth rate was estimated using the following equation:. Ln (tractors) = a + b (Time).
The estimated value of the coefficient b is 0.012.

Fertilizers:
Information on fertilizer consumption for 1961-2010 were obtained from The International
Fertilizer Industry Association (IFA). All IFADATA statistics are available in metric tonnes
of three nutrients, nitrogen (N), phosphate (P2O5) and potassium (K2O). The IFA data base
contains historical statistics of consumption, production and sales at regional and country
level. Data for 1950-1960 is from Hopkins (1981).

Land:
Information on hectares of agricultural land comes from FAOSTAT and FAO yearbooks for
the 1950s. It considers the following types of land: rainfed cropland, irrigated land and
permanent pasture. In order to account for differences in land quality, the approach proposed
by Fuglie (2008) was followed. Hence, a land quality index adjusted by “rainfed cropland
equivalents” was computed by aggregating the three land types. The quality weights were
based on type of land productivity. Estimates for the Latin American regions were used.

Agricultural output.
The information is the net value of agricultural production in 1994 Peruvian Nuevos Soles,
in millions. It was obtained from the INEI on-line database (www.inei.gob.pe). In order to
eliminate from the ouput series the effects of short-term fluctuations due to weather or other
events, the Hodrick-Prescott filter was used. Figure A1 compares the series with original
data and the resulting after applying the filter.

21
Gráfico A1. The Effects of Smoothing on Net Agriculture Output Measure (in Millions
of constant 1994 Peruvian Soles)
15000
10000
5000
0

1950 1960 1970 1980 1990 2000 2010

time

Output - actual Output - smoothed

22
 APPENDIX 2

SELECTED VARIABLES FOR THE ANALYSIS OF THE TFP

DETERMINANTS

PTF1 with constant input shares

primera diferencia de log de PTF1 PTF agraria con pesos constantes, 1994=100)
80 100 120 140 160 180

5.25
LgPTF1
1940 1960 1980 2000 2020 4.8
4.6
4.4 1940 1960 1980 2000 2020
Año Año
-.04 -.02 0 .02 .04 .06

1940 1960 1980 2000 2020

Año

PTF2 with variable input shares

primera diferencia de log de PTF2 PTF agraria con pesos variables, 1994=100)
100 120 140 160

5.25
LgPTF2
4.8
4.6
4.4
80

1940 1960 1980 2000 2020 1940 1960 1980 2000 2020
Año Año
-.1 -.05 0 .05 .1

1940 1960 1980 2000 2020

Año

23
 Public Investment Allocated to Agriculture

Trade Openness Variable

primera diferencia del log de inversioninversión
agraria publica al agro, soles constantes, 1994=100 primera diferencia del log del indice de apertura total
indice apertura comercial (x+m)/pib
-.5 0 .5 1 0 500 1000 1500 2000 -10 -5 0 5 10 20 30 40 50 60

1940

1940

1940

1940
1960

1960

1960

1960
1980

1980

1980

1980
Año

Año

Año

Año
2000

2000

2000

2000
2020

2020

2020

2020
LgInvestagro LgOpentot
2 4 6 8 3.2 3.4 3.6 3.8 4
1940

1940
1960

1960
1980

1980
Año

Año
2000

2000
2020

2020
24
 Inflation Rate

Human Capital Index

primera diferencia de log de inflacion tasa de inflacion primera diferencia del log de human capital indexquality labour human capital index
-3 -2 -1 0 1 2 0 2000 4000 6000 8000 0 .01 .02 .03 .04 200 300 400 500 600

1940

1940

1940

1940
1960

1960

1960

1960
1980

1980

1980

1980
Año

Año

Año

Año
2000

2000

2000

2000
2020

2020

2020

2020
Linflation LgHumancap
-5 0 5 10 5.2 5.4 5.6 5.8 6 6.2
1940

1940
1960

1960
1980

1980
Año

Año
2000

2000
2020

2020
25
 Structural Reform Index
Lreforms in first difference Indice reformas estructurales
-.1 0 .1 .2 .3 .4 .4 .6 .8 1

GDP per capita

1940

1940
lnGDPpc in first difference PBI per capita a soles constantes 1994
-.15 -.1 -.05 0 .05 .1 3000 4000 5000 6000 7000

1940

1940
1960

1960

1960

1960
1980

1980
Año

Año

1980

1980
2000

2000

Año

Año
2000

2000
2020

2020
lnreformas

2020

2020
-1 -.8 -.6 -.4 -.2 0

1940
Log de pbipc
8 8.2 8.4 8.6 8.8

1940
1960

1960
1980
Año

1980
2000

Año
2000
2020

2020
26
 APPENDIX 3
RESULTS OF THE LEE-STRAZICICH UNIT ROOT TEST, ONE BREAK
(VARIABLES IN LEVELS AND FIRST DIFFERENCES)

Lee-Strazicich Unit Root Test, Series LNPTF1

Regression Run From 1961:01 to 2010:01
Observations 50
Crash Model with 1 breaks
With 5 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,0253 -0,7186
Constant 0,0045 0,4207
D(1999:01) -0,0174 -0,8746

Lee-Strazicich Unit Root Test, Series LNPTF1

Regression Run From 1961:01 to 2010:01
Observations 50
Trend Break Model with 1 breaks
With 7 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,1929 -3,2981
Constant -0,0106 -2,0902
D(1982:01) 0,0174 0,9260
DT(1982:01) 0,0144 2,5851

Lee-Strazicich Unit Root Test, Series LNPTF2

Regression Run From 1961:01 to 2010:01
Observations 50
Crash Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,1276 -1,7524
Constant -0,0116 -0,8754
D(1999:01) -0,0540 -1,2873

Lee-Strazicich Unit Root Test, Series LNPTF2

Regression Run From 1961:01 to 2010:01
Observations 50
Trend Break Model with 1 breaks
With 1 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,4553 -4,0150
Constant -0,0034 -0,7119
D(1990:01) -0,1085 -4,1684
DT(1990:01) 0,0137 1,7778

Lee-Strazicich Unit Root Test, Series LNINFLATION

Regression Run From 1961:01 to 2010:01
Observations 50
Crash Model with 1 breaks
With 1 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,1806 -2,4956
Constant 0,1290 1,0383

27
D(2001:01) -2,5787 -3,1143

Lee-Strazicich Unit Root Test, Series LNINFLATION

Regression Run From 1961:01 to 2010:01
Observations 50
Trend Break Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,7269 -3,4129
Constant -0,7789 -2,4655
D(1985:01) -1,5497 -1,7599
DT(1985:01) 0,8657 2,0989

Lee-Strazicich Unit Root Test, Series LNHUMANCAP

Regression Run From 1961:01 to 2010:01
Observations 50
Crash Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,0774 -3,7287
Constant 0,0172 25,3848
D(1995:01) 0,0177 3,9214

Lee-Strazicich Unit Root Test, Series LNHUMANCAP

Regression Run From 1961:01 to 2010:01
Observations 50
Trend Break Model with 1 breaks
With 5 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,2196 -3,9886
Constant 0,0114 4,4059
D(1970:01) 0,0014 0,2490
DT(1970:01) 0,0141 3,1744

Lee-Strazicich Unit Root Test, Series LNINVESTAGRO

Regression Run From 1961:01 to 2010:01
Observations 50
Crash Model with 1 breaks
With 9 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,1107 -2,2622
Constant 0,2148 2,9250
D(1986:01) 0,4044 1,7170

Lee-Strazicich Unit Root Test, Series LNINVESTAGRO

Regression Run From 1961:01 to 2010:01
Observations 50
Trend Break Model with 1 breaks
With 3 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,4740 -4,3505
Constant 0,2646 5,3434
D(1983:01) 0,0397 0,1794
DT(1983:01) -0,3975 -5,0230

28
Lee-Strazicich Unit Root Test, Series LNOPENESS
Regression Run From 1961:01 to 2010:01
Observations 50
Crash Model with 1 breaks
With 5 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,1808 -2,3560
Constant -0,0257 -1,4279
D(1992:01) -0,1159 -1,0460

Lee-Strazicich Unit Root Test, Series LNOPENESS

Regression Run From 1961:01 to 2010:01
Observations 50
Trend Break Model with 1 breaks
With 5 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,3610 -3,3695
Constant 0,0075 0,3892
D(1984:01) 0,2572 2,4581
DT(1984:01) -0,1071 -2,4189

Lee-Strazicich Unit Root Test, Series LNPBIPC

Regression Run From 1961:01 to 2010:01
Observations 50
Crash Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,0905 -2,3831
Constant 0,0189 2,7249
D(2000:01) -0,0833 -1,5632

Lee-Strazicich Unit Root Test, Series LNPBIPC

Regression Run From 1961:01 to 2010:01
Observations 50
Trend Break Model with 1 breaks
With 1 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,1923 -3,1861
Constant 0,0442 3,5695
D(1986:01) 0,0410 0,8796
DT(1986:01) -0,0806 -2,9186

Lee-Strazicich Unit Root Test, Series LNREFORMAS

Regression Run From 1981:01 to 2010:01
Observations 30
Crash Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,1628 -2,4834
Constant 0,0072 0,8997
D(1990:01) 0,0547 0,9790

Lee-Strazicich Unit Root Test, Series LNREFORMAS

29
Regression Run From 1981:01 to 2010:01
Observations 30
Trend Break Model with 1 breaks
With 5 lags chosen from 10

Variable Coefficient T-Stat

S{1} -1,1570 -7,3224
Constant -0,3583 -6,5297
D(1996:01) -0,0216 -0,4958
DT(1996:01) 0,3489 6,4431

Lee-Strazicich Unit Root Test, Series D1LNPTF1

Regression Run From 1962:01 to 2010:01
Observations 49
Crash Model with 1 breaks
With 0 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,7298 -5,1934
Constant 0,0077 2,8728
D(1973:01) -0,0290 -1,7390

Lee-Strazicich Unit Root Test, Series D1LNPTF1

Regression Run From 1962:01 to 2010:01
Observations 49
Trend Break Model with 1 breaks
With 0 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,8153 -5,5715
Constant 0,0071 1,1372
D(1968:01) -0,0103 -0,6274
DT(1968:01) -0,0100 -1,4513

Lee-Strazicich Unit Root Test, Series D1LNPTF2

Regression Run From 1962:01 to 2010:01
Observations 49
Crash Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -3,0590 -3,5978
Constant 0,0126 2,4883
D(1971:01) -0,0331 -1,1946

Lee-Strazicich Unit Root Test, Series D1LNPTF2

Regression Run From 1962:01 to 2010:01
Observations 49
Trend Break Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -2,9450 -4,4902
Constant 0,0283 2,9610
D(1980:01) -0,1067 -3,3964
DT(1980:01) 0,0346 3,3918

Lee-Strazicich Unit Root Test, Series D1LNINFLATION

Regression Run From 1962:01 to 2010:01
30
Observations 49
Crash Model with 1 breaks
With 1 lags chosen from 10

Variable Coefficient T-Stat

S{1} -1,3917 -6,6918
Constant 0,3705 2,8563
D(1989:01) 1,1084 1,2467

Lee-Strazicich Unit Root Test, Series D1LNINFLATION

Regression Run From 1962:01 to 2010:01
Observations 49
Trend Break Model with 1 breaks
With 0 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,9213 -6,2041
Constant 0,5029 2,7707
D(1994:01) -0,5722 -0,5949
DT(1994:01) 0,0289 0,1001

Lee-Strazicich Unit Root Test, Series D1LNHUMANCAP

Regression Run From 1962:01 to 2010:01
Observations 49
Crash Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,5553 -2,9408
Constant 0,0046 2,6778
D(1994:01) -0,0082 -1,8436

Lee-Strazicich Unit Root Test, Series D1LNHUMANCAP

Regression Run From 1962:01 to 2010:01
Observations 49
Trend Break Model with 1 breaks
With 10 lags chosen from 10

Variable Coefficient T-Stat

S{1} -1,5089 -4,6058
Constant 0,0010 0,6551
D(1969:01) -0,0078 -1,7243
DT(1969:01) 0,0101 3,5611

Lee-Strazicich Unit Root Test, Series D1LNINVESTAGRO

Regression Run From 1962:01 to 2010:01
Observations 49
Crash Model with 1 breaks
With 0 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,4635 -3,7609
Constant -0,1939 -3,3428
D(1977:01) 0,1301 0,5062

Lee-Strazicich Unit Root Test, Series D1LNINVESTAGRO

Regression Run From 1962:01 to 2010:01
Observations 49
Trend Break Model with 1 breaks
31
With 0 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,6659 -4,9102
Constant -0,0998 -1,3953
D(1971:01) 0,6113 2,6532
DT(1971:01) -0,0271 -0,3252

Lee-Strazicich Unit Root Test, Series D1LNOPENESS

Regression Run From 1962:01 to 2010:01
Observations 49
Crash Model with 1 breaks
With 0 lags chosen from 10

Variable Coefficient T-Stat

S{1} -1,2181 -8,4583
Constant -0,0745 -4,7292
D(1986:01) -0,2649 -2,6732

Lee-Strazicich Unit Root Test, Series D1LNOPENESS

Regression Run From 1962:01 to 2010:01
Observations 49
Trend Break Model with 1 breaks
With 0 lags chosen from 10

Variable Coefficient T-Stat

S{1} -1,1205 -7,5371
Constant -0,1101 -5,2448
D(2004:01) 0,1274 1,1830
DT(2004:01) 0,0032 0,0702

Lee-Strazicich Unit Root Test, Series D1LNPBIPC

Regression Run From 1962:01 to 2010:01
Observations 49
Crash Model with 1 breaks
With 1 lags chosen from 10

Variable Coefficient T-Stat

S{1} -0,8013 -5,1206
Constant -0,0318 -3,6590
D(1993:01) 0,0999 2,2198

Lee-Strazicich Unit Root Test, Series D1LNPBIPC

Regression Run From 1962:01 to 2010:01
Observations 49
Trend Break Model with 1 breaks
With 8 lags chosen from 10

Variable Coefficient T-Stat

S{1} -2,7756 -5,3570
Constant -0,0615 -4,7313
D(1991:01) -0,2193 -3,4698
DT(1991:01) 0,0782 4,7881

Lee-Strazicich Unit Root Test, Series D1LNREFORMAS

Regression Run From 1982:01 to 2010:01
Observations 29
Crash Model with 1 breaks
With 0 lags chosen from 10

32
Variable Coefficient T-Stat
S{1} -0,7345 -4,3938
Constant 0,0050 0,4151
D(1985:01) 0,1973 3,1459

Lee-Strazicich Unit Root Test, Series D1LNREFORMAS

Regression Run From 1982:01 to 2010:01
Observations 29
Trend Break Model with 1 breaks
With 7 lags chosen from 10

Variable Coefficient T-Stat

S{1} -2,8339 -4,7297
Constant 0,1889 4,3406
D(1998:01) 0,3851 2,8286
DT(1998:01) -0,1420 -3,6782

33
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