Agricultural Productivity Growth

REVIEW OF RURAL AFFAIRS
Agricultural Productivity Growth

Is There Regional Convergence?
Balaji S J, Suresh Pal
This study examines the question of convergence in land

and labour productivity in Indian agriculture between
1991 and 2011. The tendency of low-productivity states
to catch up with high-productivity states is studied
through the unconditional -convergence approach,
and the operation of Galtons fallacy through growthterminal productivity-level regressions. The diminution
of variance in productivity levels is tested using the
-convergence approach and the robustness of the
results is tested using alternative test statistics. The
results reveal that states are converging in terms of land
productivity, but not in terms of labour productivity.
The authors are grateful to an anonymous referee for very detailed

comments and suggestions on an earlier version of the paper.
Balaji S J (balajiiari@gmail.com) is a PhD Scholar at the Indian Agricultural
Research Institute; Suresh Pal (spl@iari.res.in) is Principal Scientist,
Division of Agricultural Economics, Indian Agricultural Research
Institute, New Delhi.
74
Introduction
he neoclassical growth theory assumption of diminishing returns implies that the marginal productivity of
capital is higher in capital-scarce countries. With similar
savings rates, these low-income economies will grow faster. If
this scenario holds, there should be a negative correlation
between the initial income level and subsequent growth rate.
This led to the popular methodology of investigating convergence, namely, running what is now known as growth-initial
level regressions. The coefficient of the initial income variable,
say , in these regressions is supposed to pick up the negative
sign. Convergence judged by the sign of is known as the
-convergence, which indicates the catching-up behaviour of
poorer economies with richer ones.
However, researchers such as Hotelling (1933), Friedman
(1992), Lichtenberg (1994), and Sala-i-Martin (1996) have
emphasised that the hypothesis of convergence and meanreversion are not equivalent. They regard the test of growthinitial level regression as a test of mean-reversion, not convergence. According to them, convergence is a proposition regarding dispersion of the cross-sectional distribution of income (and growth rate), and a negative from the growth-initial level regression does not necessarily imply a reduction in
this dispersion. They point out that a negative can just be an
example of the more general phenomenon of reversion to the
mean, and by regarding convergence in it, growth researchers
are falling into Galtons fallacy. Instead of judging indirectly
and perhaps erroneously through the sign of , convergence
should be judged directly by looking at the dynamics of dispersion of income level and/or growth rate across countries. This
gave rise to the concept of -convergence, where is the notation for standard deviation of the cross-sectional distribution
of either income level or growth rate.
Friedman (1992) and Hotelling (1933) note that () convergence observed in the growth-initial income regression disappears when growth is plotted against the terminal year instead
of the initial year and the seeming convergence in a growthinitial income regression is a statistical fallacy (Galtons fallacy)
resulting from the method of grouping. Hotelling (1933: 464)
added, The real test of a tendency to converge would be in
showing a consistent diminution of variance, not among
means of groups, but among individual enterprises. Therefore, it stands out that while -convergence has been regarded
as the test of mean-reversion that explains whether poorer
economies are catching up with richer ones, -convergence
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Economic & Political Weekly
has been perceived as the real test of convergence, which

explains the trend in cross section dispersion in income (or
growth) across countries. Moreover, -convergence is a necessary, but not a sufficient, condition for -convergence. These
measures are widely used for the study of convergence in economic growth (see Islam (2003) for a detailed review).
Much of the empirical works in convergence analysis have
studied developed economies (Barro and Sala-i-Martin 1992;
McCunn and Huffman 2000; Poudel et al 2011) and studies
that concentrate on the agriculture sector in developing countries such as India are few (Mukherjee and Kuroda 2003). It
appears that none of the studies have addressed the convergence hypothesis in the agriculture sector in India in the postreform period. This paper examines the question of convergence
in Indian agriculture since the post-reform period. It focuses
on the questions of (a) whether there has been a catching-up
tendency (-convergence) of slow-growing states with fastgrowing ones; and (b) whether there has been a tendency
towards convergence (-convergence) in agricultural productivity in the last two decades (1991-2010) over a representative
cross section of Indias states. The paper also tests the operation
of Galtons fallacy through growth-terminal level regressions
for robustness of the results.
Data
Land productivity in agriculture is the value of output of the

crop sector in agriculture per hectare of net sown area, and
labour productivity in agriculture is the value of output per
unit of labour in the labour force in agriculture.1 The total
labour force in agriculture is the sum of number of cultivators
and agricultural labourers. Details on the state-wise value of
output in the agriculture sector were collected from the Central
Statistics Office (CSO) data series of the Ministry of Statistics
and Programme Implementation (MOSPI) in different base
years (1993-94, 1999-2000 and 2004-05). Values at constant
2004-05 series were derived using the old series. Details on net
sown area were obtained from the Directorate of Economics
and Statistics (DES)2 (Ministry of Agriculture, Government of
India). Figures on the number of cultivators and agricultural
labourers were obtained from census reports in different census
years and the values in between were linearly interpolated.
Methodology
On the empirical front, modelling and testing the convergence

hypothesis is far from settled. As Islam (2003) observes, either
conditional or unconditional, the informal and formal cross
section approaches, the panel approach, and the time series
approach (in part) have all studied -convergence. These
approaches have generally dealt with convergence across
economies (although the proposition of convergence in neoclassical growth theory is within an economy) in terms of per
capita income level. The formal cross section approach and
panel approach have been used to study club-convergence and
total factor productivity (TFP) convergence. The time series approach has been used to investigate convergence both within an
economy and across economies. But the cross section and panel
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december 27, 2014
vol xlix no 52
approaches suffer from endogeneity bias, since variables such

as investment rate and labour force growth rate used as
explanatory variables in growth-convergence equations are likely
to be jointly determined. Moreover, Bernard and Durlauf (1996)
show that cross section tests turn out to place much weaker
restrictions on the behaviour of growth across entities. As a
result, the cross section tests can reject a no convergence null
hypothesis for the data generated by economies with different
long-run steady states. Time series tests do not spuriously
reject the no convergence null for the data generated by
multiple long-run equilibria. However, the time series approach
requires that the economies under analysis are near their longrun equilibria. Thus, different approaches have their own
advantages and limitations. Despite the observations of
Hotelling (1933), Friedman (1992), Lichtenberg (1994), and
Sala-i-Martin (1996) and the criticisms of Quah (1993), researchers have continued to be interested in -convergence for
the reason that -convergence requires -convergence. The
other reason is that -convergence could provide information
on the structural parameters of growth models. The present
study investigated both (unconditional) -convergence and
-convergence in land and labour productivity across states in
India. Along with the growth-initial productivity regressions
to study -convergence, the study also fitted growth-terminal
productivity regressions to test Galtons fallacy.
The Model
(a) -Convergence and Galtons Fallacy
Following Sala-i-Martins (1996) exposition, the present study

uses the following equation to investigate unconditional
-convergence across states. Assume that -convergence holds
for states i = 1,2,,N. Natural log-income of ith state at time t
can be approximated by,
ln yi,t = + (1 ) ln(yi,t1) + ui,t
...(1)
where yi,t is land (or labour) productivity in state i at time t,

0<<1 and ui,t has zero mean, finite variance, 2u, and is independent over t and i. Since is assumed to be constant across
states, balanced growth paths are identical (allowing different
is for 0<<1 would imply conditional -convergence).
Manipulating equation (1) yields,
ln(yi,t|yi,t1) = ln(yi,t1) + ui,t
...(2)
Thus, >0 implies a negative correlation between growth and

initial log income. Between any period t and t + T, equation (2)
can be written as
yi,t+T
1
ln
= lnyi,t + ui,t
yi,t
T
...(3)
Replacing yi,t on the right-hand side of equation (3) with yi,t+T ,

1
yi,t+T
ln
= lnyi,t+T + ui,t
T
yi,t
...(4)
Equation (4) refers to the relation between growth and the terminal year. >0 in equation (3) and a consequent <0 in equation (4) represent Galtons fallacy, observed in Friedman (1992).
75
The growth rates obtained in equations (3) and (4) consider

only the initial and terminal year productivity levels and ignores values in the rest of the period. To avoid this
limitation, the present study used trend growth rate in equations (3) and (4) given by,
The test statistic T2 has 2 (1) distribution and T3 has a normal distribution with N-1 degrees of freedom. The study computed all T1, T2 and T3 statistics in investigating the convergence hypothesis.
ri = ln(yi,t) + ui,t
...(3a)
Results and Discussion
ri = ln(yi,t + T) + ui,t
...(4a)
Trends in Agricultural Productivity
where ri is the trend growth rate between any two time period
t and t + T, which can be obtained from the ordinary least
squares (OLS) estimate in the following regression.
lnyt = t
...(5)
r = exp() 1
...(6)
where yt is land or labour productivity at time t.

(b) -Convergence
Existence of -convergence may necessarily not imply

-convergence among states. The () convergence hypothesis
is that
d[var(ln (yi,t )] < 0
...(7)
dt
where yi,t is land (or labour) productivity in state i at time t and
var(yi,t ) denotes variance across states. Equation (5) can be
formally tested (McCunn and Huffman 2000) using
... (8)
where t is a zero mean random disturbance term. Sufficient

condition for productivity (land or labour) convergence across
states is that 2 is negative and significantly different from zero.
When 2 is not significantly negative, unconditional convergence
does not occur, or growth rates across states may diverge over
time. To test the robustness of the results (-convergence), the
study followed the tests suggested by Lichtenberg (1994) and
Caree and Klomp (1997). Lichtenberg (1994) shows that the
test of mean-reversion hypothesis <0 (based on the t distribution with n-2 degrees of freedom) is equivalent to a test of
T1 =
varlnyi,t
varlnyi,t+T
R2
>1
(1 + )2
T3 =
76
2
N 21 1
T
212
1 (12 2T )2
2 )
4 (12 2T 1T
Land Productivity
...(9)
where yi,t and yi,t+T are productivity levels in initial and terminal years of any given time period t and t + T. The test statistic
follows F distribution N-2, N-2 degrees of freedom where N represents the number of states. Caree and Klomp (1997) show
that the test statistic proposed by Lichtenberg (1994) overlooks
the dependency between the two variances, and hence probabilities of committing a type II error of incorrectly rejecting
the convergence hypothesis are large, in particular in shorter
time periods. They propose two alternative test statistics that
are robust to shorter time periods given by
T2 = (N 2.5) ln 1 +
Figure 1: Land and Labour Productivity Trends in Indian Agriculture

(1992-2011)
40
...(10)
...(11)
Thousands
var [ln(yi,t)] 1 + 2t + t
Trends in land and labour productivity in Indian agriculture

between 1991 and 2011 are shown in Figure 1. Land productivity was calculated as the ratio of value of output in agriculture
per hectare of net area sown and labour productivity was
calculated as the ratio of value of output per unit of the workforce in agriculture. To account for year-to-year fluctuations,
growth rates were estimated from two-year moving averages
of the data series. Land productivity increased consistently
through the period with an average growth of 2.38% per annum.
The growth was more or less equal in the 1990s and 2000s.
The 1992-2001 decade registered an annual growth of 2.97%
and it declined slightly to 2.50% in the 2001-11 decade. The
labour productivity also increased, but not as much land productivity. The labour productivity growth attained during
1992-2011 (1.60%) was less than the growth realised in land
productivity. But unlike land productivity, where growth was
almost equal in both the decades, labour productivity declined
drastically from 2.78% during 1992-2001 to 1.44% during
2001-11. Such a downward shift in labour productivity growth
could be attributed to a significant increase in the labour force
in the agricultural sector. For example, average growth in
labour force, which was 0.10% per annum in the first decade,
increased to 1.16% per annum in the second decade. While
growth in the value of output in agriculture remained more or
less stable in both the decades (2.88% and 2.61%, respectively), the increase in labour force growth pushed the labour
productivity growth down in the later decade.
30
Labour Productivity
20
10
1991
1996
2001
2006
2011
Land and labour productivity values are at constant 2004-05 prices.

Source: Authors calculations.
Though the magnitudes differed, land productivity grew in

all the states between 1992 and 2011. The growth was highest in
Bihar (5.92%), followed by Maharashtra (4.34%) and Madhya
Pradesh (4.13%), while states such as Uttar Pradesh (1.89%),
Kerala (1.54%), Punjab (1.32%) and Assam (0.91%) grew at a
moderate rate (Table 1, p 77). Gujarat (6.41%), Jammu and
Kashmir (5.58%), Maharashtra (4.50%), Madhya Pradesh
(4.39%), and Andhra Pradesh (4.37%) attained substantially
higher growth during 2001-11, and Bihar (7.34%) grew more
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vol xlix no 52
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rapidly during 1992-2001. Contrary to land productivity, very few

states achieved significant growth in labour productivity. They
included Jammu and Kashmir (3.58%), Bihar (2.90%), Kerala
(2.82%), and Maharashtra (2.14%). Uttar Pradesh, Rajasthan,
Assam, Madhya Pradesh, and Odisha recorded negative
growth rates during 1992-2001. While labour productivity
grew faster in the later decade in Gujarat (6.06%), Jammu and
Kashmir (5.71%), Andhra Pradesh (3.64%) and Haryana
(3.38%), Kerala (4.71%) and Bihar (4.12%) registered higher
labour productivity growth in the first decade.
Annual land productivity growth in these states between

1992 and 2011 was 3.25%, 2.60% and 2.57%, respectively. On
the other hand, states such as Kerala, Punjab and Assam,
where the initial land productivity level was relatively high,
grew by less than 2.0%. Thus, while states with low land productivity grew faster, by more than 4%, high productivity
states grew by less than 2%, indicating a strong () convergence
across them.
Figure 2a: Beta Convergence in Land Productivity (1992-2011)
8
Table 1: Land and Labour Productivity Growth in Indian Agriculture (1992-2011)
Andhra Pradesh
Assam
Bihar + Jharkhand
Gujarat
Haryana
Himachal Pradesh
Jammu and Kashmir
Karnataka
Kerala
Madhya Pradesh + Chhattisgarh
Maharashtra
Odisha
Punjab
Rajasthan
Tamil Nadu
Uttar Pradesh + Uttarakhand
West Bengal
All-India
27,825
40,546
14,876
17,220
37,777
41,830
58,138
20,516
54,860
11,186
14,796
23,788
54,494
11,480
27,975
34,676
49,390
24,342
15,436
25,213
5,232
21,155
48,963
19,711
22,623
21,188
44,065
16,703
14,915
20,015
71,299
20,125
12,684
26,930
25,221
14,971
2.60
0.91
5.92
3.25
2.59
3.82
3.28
2.16
1.54
4.13
4.34
2.57
1.32
2.11
2.16
1.89
2.32
2.38
1.46
-0.52
2.90
1.22
0.61
0.32
3.58
0.50
2.82
-0.21
2.14
-0.12
0.76
-1.14
0.73
-1.16
0.21
1.60
Land and labour productivity values are at constant 2004-05 prices.

Convergence in Productivity
-Convergence: As mentioned earlier, the convergence phenomenon was studied for different periods. First, convergence
in land and labour productivity was studied for the entire period (1992-2011). Subsequently, this period was divided into
two sub-periods 1992-2001 and 2001-11 to study the convergence phenomenon in two different decades. To test whether
the speed of convergence had been higher after 2005, we studied convergence during 1992-2005 and 2005-11.
The growth-initial productivity regression for 1992-2011
supported existence of -convergence in land productivity across
states (Table 2a, p 78). The coefficient of land productivity in
the initial year (1992) against growth was negative (1.172)
and it was highly significant (p value = 0.031), indicating that
the states with lower land productivity grew faster than the
states with high land productivity (Figure 2a). Land productivity
growth was highest in Bihar (5.92%), followed by Maharashtra
(4.34%) and Madhya Pradesh (4.13%). But, in absolute terms,
it was low in these states, that is, Rs 14,876 per hectare (ha) in
Bihar, Rs 14,796/ha in Maharashtra, and Rs 11,186/ha in
Madhya Pradesh against the all-India average of Rs 24,342/ha
in 1992. Other states that grew fast despite low initial land
productivity levels were Gujarat, Andhra Pradesh and Odisha.
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december 27, 2014
vol xlix no 52
y =y -1.1745x
14.778
= -1.174x +
+ 14.77
RR==0.2735
0.273
Land Productivity Growth (% pa)
Values at 1992 (Rs)

Annual Growth (%)
Land
Labour
Land
Labour
Productivity Productivity Productivity Productivity
BHJ
MPC
MH
HP
GJ
RJ
JK
OD
TN
HR
AP
TN
WB
UPU
AS
KL
PJ
0
9.00
10.00
10.50
ln (Land Productivity @ 1992)
Land productivity values are at constant 2004-05 prices.
9.50
11.00
11.50
Figure 2b: Beta Convergence in Labour Productivity (1992-2011)

4
y = -0.4691x + 5.5134
y = -0.469x + 5.513
R =R
0.0384
= 0.038
JK
Land Productivity Growth (% pa)
State
BHJ
KL
MH
AP
1
TN
HP
0
8.00
-1
MPC
GJ
HR
KR
PJ
WB
OD
AS
RJ
11.50
UPU
-2
ln (Land Productivity @ 1992)

As one can see from Table 2a, the speed of convergence

(coefficients of the initial years in growth-initial productivity
regressions) decreased over time, while the speed of convergence remained more or less unaltered in both the decades
(1.53%), with a significant drop in p-values, from 1.46% during
1992-2005 to 1.20% during 2005-11. Moreover, for 2005-11, the
convergence hypothesis could not be established strongly,
indicated by low significance of the coefficient corresponding to
the initial productivity variable (p-value = 0.270). This evidence
is against the general belief that low productivity states performed better during 2005-11 (Chand and Parappurathu
2012). For example, between 2005 and 2011, low-productivity
states such as Karnataka (6.09%), Madhya Pradesh (4.38%),
Maharashtra (3.87%), and Odisha (3.68%) performed relatively
better than Himachal Pradesh (0.74%), Punjab (1.94%), and
Kerala (0.77%), the states with high initial land productivity
77
levels. But the speed of convergence across states between 2005

and 2011 was masked by the underperformance of Rajasthan,
which registered a negative growth rate (0.04%) during
this period. Having the lowest initial land productivity level
(Rs 17,546/ha during 2005), a negative growth rate in the state
masked the efforts of better-performing states. As shown in
Table 2a, when Rajasthan was excluded from the analysis, the
speed of convergence turned out to be 2.40%, the highest
growth rate achieved among all different periods. Thus, the
study supports the existing literature of relatively better
performance of states over 2005-11.
Table 2a: -Convergence and Galtons Fallacy in Land Productivity (1992-2011)
Explanatory Variable
Coef
Period: 1992-2011
ln (land productivity @ 1992)
Period: 1992-2001
Period: 2001-11
Period: 1992-2005
Period: 2005-11
ln (land productivity @ 2005)*
P>|t|
Dependent Variable
R2
Shapiro-Wilk
P>|z|
White
P> 2
Land productivity growth (1992-2011)

1.172
0.031
0.273
0.568
0.458
0.578
0.422
0.043
0.326
0.814
1.533
0.037
0.260
0.846
0.465
0.794 0.366
0.055
0.554
0.286
1.520
0.108
0.163
0.764
0.654
0.325
0.764
0.006
0.729
0.936
1.457
0.045
0.242
0.004
0.454
0.803 0.390
0.050
0.001
0.579
1.203
0.270
0.080
0.820
0.149
2.402
0.027
0.303
0.285
0.739
0.234 0.837
0.003
0.787
0.313
* Excludes Rajasthan.
Source: Authors estimates.
Table 2b: -Convergence and Galtons Fallacy in Labour Productivity (1992-2011)

Explanatory Variable
Coef
Period: 1992-2011
ln (labour productivity @ 1992)
Period: 1992-2001
Period: 2001-11
Period: 1992-2005
Period: 2005-11
P>|t|
Explained Variable
R2
Shapiro-Wilk
P>|z|
White
P> 2
Labour productivity growth (1992-2011)

0.473
0.447
0.039
0.662
0.923
0.348
0.574
0.022
0.215
0.208
0.953
0.376
0.053
0.293
0.785
0.697
0.532
0.027
0.176
0.019
0.224
0.819
0.004
0.645
0.701
0.909
0.329
0.064
0.833
0.533
0.842
0.335
0.062
0.102
0.203
0.120
0.893
0.001
0.043
0.008
0.475
0.587
0.020
0.318
0.408
0.234
0.786
0.005
0.347
0.437
Contrary to land productivity, the analysis failed to reject

the null hypothesis of no () convergence in labour productivity
in different periods. This was shown by the negative but insignificant coefficients and much lower coefficients of determination in the growth-initial year labour productivity regression
(Table 2b). No tendency to grow faster was observed in the
low-labour productivity states, or to slow growth in the highlabour productivity states. Labour productivity in the initial
78
year (1992) was the highest in Punjab (Rs 71,299), followed by

Haryana (Rs 48,963) and Kerala (Rs 44,065). Between 1992
and 2011, while labour productivity grew by 2.82% in Kerala,
Punjab and Haryana grew by less than 1%. In contrast, Bihar,
which had the lowest labour productivity in 1992 (Rs 5,232),
grew by 2.90%, just below Jammu and Kashmir (3.58%), the
state with the highest labour productivity growth. A similar
trend was observed in other periods. Labour productivity growth
was negative in Punjab (0.09%) and Haryana (2.22%)
whereas it was 4.12% during 1992-2001 in these states. Despite
a positive growth in the later decade (1.50% and 3.38%, respectively), Punjab and Haryana grew relatively slower than
the low-productivity states of Gujarat (6.06%) and Jammu and
Kashmir (5.71%). Thus, the results did not establish
-convergence in labour productivity.
Galtons Fallacy
The tendency to converge (-convergence) disappears when

the growth is plotted against the terminal year rather than the
initial year, and the entities tend to diverge rather than converge.
This phenomenon is referred as Galtons fallacy or statistical
(regression) fallacy (Friedman 1992). Hotelling (1933) observed this phenomenon and referred to it as a statistical fallacy resulting from the method of grouping and suggested
-convergence was superior to -convergence. The study, in
addition to investigating -convergence through productivity
regressions, also examined the operation of so-called Galtons
fallacy through growth-terminal productivity regressions in
land and labour productivity (Tables 2a and 2b).
The study failed to establish such statistical fallacy both in
land and labour productivity in all the periods. The
-convergence observed in the growth-initial productivity regressions did not persist when growth rates were regressed
against terminal years rather than the initial years, shown by
the negative and highly insignificant terminal year land productivity coefficients and the lowest coefficients of determination in different periods. Thus, the seemingly converging tendency in the growth-initial level regressions turned up to have
no relation in the growth-terminal productivity regressions.
The results of labour productivity regressions proved the
same, except the difference of the positive terminal productivity coefficients. The results invalidated the assumption of superiority of -convergence over -convergence as argued by
Hotelling (1933) and Friedman (1992). Since -convergence is
a necessary but not a sufficient condition for convergence, the
-convergence approach was employed.
-Convergence: The trend in cross-sectional dispersion of
land and labour productivity in all the states was studied using
standard deviation in a natural logarithm as a measure of dispersion. The results obtained by regressing standard deviation
of (natural logarithm) land and labour productivity against
the time variable are shown in Table 3a (p 79). To test the robustness of the results, the test statistics suggested by Lichtenberg (1994) and Caree and Klomp (1997) were calculated and
the results are in Table 3b (p 79).
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Explained Variable
Period: 1992-2011
SD [ln(land productivity)]
SD [ln(labour productivity)]
Period: 1992-2001
Period: 2001-11
Period: 1992-2005
Period: 2005-11
SD [ln(land productivity)]*
Coef
P>|t|
R2
0.005
0.001
0.000
0.824
0.802
0.003
0.994
0.932
0.355
0.069
0.006
0.002
0.044
0.625
0.416
0.031
0.998
0.608
0.413
0.164
0.005
0.002
0.000
0.093
0.776
0.281
0.868
0.060
0.913
0.972
0.006
0.001
0.000
0.371
0.670
0.067
0.980
0.601
0.316
0.114
0.003
0.009
0.001
0.175
0.002
0.883
0.333
0.878
0.005
0.092
0.854
0.263
0.508
0.592
0.444
Shapiro-Wilk BreuschP>|z|
Godfrey
P>2
* Excludes Rajasthan.
Period: 1992-2011
ln(land productivity)
ln(labour productivity)
Period: 1992-2001
Period: 2001-11
Period: 1992-2005
Period: 2005-11
Lichtenberg (1994)
Caree and Klomp (1997)
T1
Critical F
T2
Critical 2
T3
Critical t
1.530
0.981
2.400
2.400
4.003
0.009
3.841
3.841
1.645
-0.109
1.746
1.746
1.271
1.059
2.400
2.400
1.792
0.070
3.841
3.841
1.021
0 .262
1.746
1.746
1.203
0.927
2.400
2.400
0.990
0.198
3.841
3.841
0.807
-0.811
1.746
1.746
1.477
1.019
2.400
2.400
3.906
0.011
3.841
3.841
1.540
0 .109
1.746
1.746
1.036
0.963
2.400
2.400
0.072
0.098
3.841
3.841
0 .240
-0.611
1.746
1.746
Critical values are significant at 5% level and at 10% level; critical values for T1, T2 and T3 will
be 1.970, 2.705, and 1.337, respectively.
Plotting the coefficient of variation against time showed

that except in few years dispersion in land productivity across
states declined gradually (Figure 3). The coefficients of the
time variable were negative and highly significant in all the
periods, except 2005-11. For 2005-11, though the coefficient
was negative, it was significant only at the level of 17.5%. But,
as shown earlier, insignificance of the time coefficient turned
out to be highly significant when Rajasthan was excluded from
the analysis. One could also observe that the rate of decline of
dispersion is the highest in 2005-11 when Rajasthan is dropped.
These results are inconsistent with those obtained in the
-convergence approach (note that in the -convergence
approach, for 2001-11, convergence can be established at a 11%
significance level). Thus, the study rejected the null of no
convergence in land productivity. The test statistic T1 failed to
establish convergence in land productivity in different periods, thereby supporting the view of Caree and Klomp (1997)
that the T1 statistic is biased towards finding no convergence.
Both T2 and T3 statistics established convergence for 1992-2011
Figure 3: Sigma Convergence in Land and Labour Productivity (1999-2011)

0.65
Labour Productivity
0.60
0.55
Land Productivity
0.50
0.45
0.40
1991
1996
2001
2006
2011

Table 3b: Results of Alternative Test Statistics of -Convergence

Variable
and 1992-2005, but they failed to do so for the other periods

(note that T3 statistics established convergence at 10% significance levels in these periods), as observed in earlier
approaches of convergence analysis.
Standard deviation in Land & Labour Productivity
Table 3a: -Convergence in Land and Labour Productivity (1992-2011)
EPW
december 27, 2014
vol xlix no 52
Unlike land productivity, no trend was observed in the

standard deviation of labour productivity. The time coefficients in this case were, although negative in most of the
regressions, insignificant (except for 2001-2011, where the
coefficient was significant at the 10% level). Hence, the study
could not reject the no convergence null hypothesis in the case
of labour productivity. Similar results were obtained in the
alternative tests.
Conclusions
A consistent increase in land productivity is found in all the

states since 1991. The growth in land productivity has been
higher in states that had low initial (land) productivity levels
than in states with high levels of initial (land) productivity.
Thus, the comparatively agriculturally poor states, if not all,
were able to catch up with the rich states, demonstrating
-convergence. Although the growth of land productivity
varied across states, the average speed of convergence remained
more or less equal during the 1990s and 2000s. However, the
speed of convergence was the highest during 2005-11 than in
any other period considered in the study. As a result, interstate differences in land productivity have significantly declined in the country. Hence, there has been -convergence as
well. But increase in labour productivity has been consistent
only in a few states, and many of the states grew irrespective
of their initial labour productivity levels. Therefore, there has
been no catching up in labour productivity. Neither did the
low (labour) productivity states grow faster, nor did the high
(labour) productivity states grow slower to demonstrate the
catching-up or -convergence process. Also, there was no
significant change in the variation in labour productivity and
it has remained stable over the past two decades, indicating
no -convergence. These tendencies are likely to continue in
Indian agriculture unless adequate investments or technological
interventions are made to enhance labour productivity.
This will also help increase land productivity, leading to a
further convergence.
79
Notes
1 (a) Disregarding quality differences (as selfemployed farmer is more efficient than a hired
labourer), labour input for an industry is more
appropriately measured as number of hours actually worked. Hence, labour productivity
would be the ratio of value of output of an industry to the total number of work hours. Since
official data sources for number of labour hours
spent on agriculture and other allied occupations are not available, we defined labour productivity in terms of the number of workers
engaged in the sector. (b) The total labour
force in agriculture used in the study includes
those engaged in agriculture as well as in allied
agricultural activities. Hence, actual labour
productivity estimates will be slightly higher
than the obtained estimates. (c) Temporary or
seasonal migrants are not accounted for in the
labour data used because detailed classification is not available in census reports. Interstate migration is much less in the agricultural
labour force (Migration in India 2007-2008,
NSSO) and we believe that this would not
affect the overall results. We acknowledge
these as limitations of our study.
2 It was noticed that the estimates of net sown
area given by the DES for Odisha for 2009-10
and 2010-11 are different from those given by
the Government of Odisha (Odisha Agricultural
Statistics 2009-10, 2010-11) for these years. The
state estimates were found to be more reliable
and we have used them.
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