Sarhad J. Agric. Vol.29, No.

3, 2013

IMPACT OF GREEN REVALUATION VARIABLES ON AGRICULTURE

PRODUCTIVITY IN PAKISTAN
MUHAMMAD ZAHEER KHAN1* and HINA GUL2.
1. Department of Economics, Balochistan University of Information Technology and Management Sciences,
Quetta - Pakistan.
2. Aims Educational system, Islamabad - Pakistan.
*Correspondence author: zaheer.onnet@yahoo.com.
ABSTRACT
This paper attempts to analyze the impact of different inputs factors on agriculture productivity in Pakistan for
the period 1980-2010. Time series econometric technique has been used for the analysis. Johansen co-
integration and vector error correction methods were used to determine the long run and short run relationship
in the model, and Granger causality test was used to determine the direction of relationship. The results indicate
that, even though all the green revaluation variables except fertilizers are positively related to agriculture
productivity in Pakistan, the impact of these variables is not that significant
Keywords: Green Revaluation, Agriculture output, Time series econometric, Pakistan.
Citation: Khan, Z.M. and G. Hina. 2013. Impact of Green Revaluation Variables on Agriculture Productivity
in Pakistan. Sarhad J. Agric. 29(3): 455-460
INTRODUCTION
Agriculture is the leading sector in most of the developing countries of the world, therefore; agriculture
development invariably forms a major part of the overall economic development of these countries. Agriculture
sector is considered the backbone of the economy and deserves special attention of the policy makers. Major
Contributions of this sector are in terms of provision of food for domestic consumption, supply of labour for
industrial development, enlargement of the size of the market for industrial output, increased supply of domestic
savings and finally foreign exchange earnings. The agriculture sector is not only the major contributor towards
GNP; it also helps in sustaining the country’s agro-based industrial structure by providing necessary raw-
materials.
Agriculture remains the most dominant economic activity in Pakistan in many ways. It is the single largest
source of employment accounting about 42% of the labour force, most importantly; 67.5% of country’s
population living in rural areas are directly or indirectly dependent on agriculture for their livelihood. It accounts
for 23% of the GDP.
Progress in biotechnology has improved the agriculture productivity in agro based countries. In Pakistan, the
Green Revolution started during early 1960s, although some of the modern inputs were introduced in the late
1960s. The main ingredients (inputs) of the Green Revolution were HYVs, fertilizer, pesticides and irrigation.
Moreover, agriculture mechanization had also contributed significantly in agricultural growth. Khan and Maki
(1980) confirm that HYV of wheat and rice are more efficient than the old varieties, Chaudhry (1982) and
Chaudhary (1994) also supported that adoption of HYVs irrigation, fertilizers, and pesticides for high output.
Chaudhry (1973, 1985) found an appreciable decline in income inequalities in the rural areas during the Green
Revolution; however he also identified lags in adoption of the new technology, Khan (1983) also supported the
study of Chaudhry (1973).
Agriculture sector is dominated by crop production in Pakistan. Thus, major crops are the trend setters for the
overall performance of agriculture. There are four major crops, namely, wheat, rice, cotton and sugarcane .The
fifth most important crop is maize but its production is low as compared to other crops. Afzal (1973) identified
the combination of wheat-rice as most profitable for farmers while the wheat-cotton was the second most
profitable combination for crops in Pakistan. Khan and Siddiqui (1982) showed that, yield effect accounts for a
greater proportion of the additional output of wheat and rice, reflecting the Joint impact of new seeds, fertilizer
and water. Javed et al, (2010) also found the positive impact of new improved and improved technology on
investment in agricultural research.
Lack of finance is one of the major problems faced by small farmers, which prevents them from adopting the
new technology. Study conducted by Mohammad (1986) showed high adoption rate of new technology in large
farmers as compare to small farmers that benefited the large farmers as compare to small farmers in terms of
better productivity and more profit during that time.
Muhammad Zaheer Khan and Hina Gul. Im p a ct o f g re en re va l ua t io n va ria b le s… 456

Agriculture credit is playing a pivotal role in providing the financial assistance to small farmers. Siddiqi et al,
(2004), Ahmad et al, (2006), Zuberi (1989), and many others have identified the role of agriculture credit in
increasing the agriculture productivity in Pakistan.
The objective of this study is to determine the impact of Green Revolution variables (fertilizer, pesticides, and
irrigation improved seed and agriculture credit) on agriculture productivity in Pakistan.
MATERIALS AND METHODS
Data Description
Data has been taken from Economic Survey issued by Government of Pakistan and Agriculture Statistics of
Pakistan by Federal Bureau of Statistics. Crop yield per hector has been used as a measure of agriculture
productivity, green revolution variables including “fertilizer, irrigation, improved seed and agriculture credit”
are used as the determinants of agriculture productivity, in addition the labour force participation in agriculture
sector is included in the model to determine the participation rate of agriculture labour in the economic activity.
Model Specification
We have used the framework of modified Cobb- Douglas framework used by Azhar (1991).
Initially the production function is as:

…………… (1)
Where:

…………… (2)
And it takes the following form:

……….. (3)
In equation (3) Zik is used to represent the variables that are introduced explicitly as shift variables and
Xij represents the implicit variables of the production function.
Following equation has been developed on the bases of the above equation for the analysis:

LNY = α + β1(LNIR) + β2(LNIS) + β3(LNFER) + β4(LNAC)+ β5(LNLB) + µi ........ (4)

Where:
LN = Natural logarithm
Y = Crop Yield
IR = Irrigation
IS = Improved Seeds
FER = Fertilizer
AC = Agriculture Credit
LB = labour employed in agriculture sector
µi = Error Term
Methodology
The impact of green revolution variables on agriculture productivity in Pakistan for the period 1980-2010 has
been estimated by using time series econometric technique.
Sarhad J. Agric. Vol.29, No.3, 2013 457

Unit Root and Johansen Co-integration Tests:

Several tests of non-stationarity called unit root tests have been developed in the time series econometrics
literature. If the non-stationarity hypothesis is rejected then the traditional econometrics methods can be used.
Otherwise, the theory of co-integration may provide useful information about the relationship between the
variables.
To test the data series for unit roots, Augmented Dickey-Fuller (ADF) test developed by Dickey and Fuller
(1979) is used.
ADF test is based on the following regressions:
Yt = α +  Yt-1 +  j Yt-j + t… (a)
Yt = α +  Yt-1 + t +  j Yt-j +t …..(b)
Where t is assumed to be Gaussian white noise.
Co-Integration Test:
The general requirement for applying the co-integration technique is to have variables of the same order of
integration at hand. A time series, which is stationary after being differenced once is said to be integrated of
order 1 and is, denoted I (1). A series that is stationary without differencing is said to be I (0). A series which is
I (1) is said to have a unit root and a series which is I (d) has d unit roots.
Johansen’s method use two models (trace test and maximum eigenvalue test to determine the long run
relationship and to obtain the number of co-integrating vectors. Trace statistics tests the Ho, that the number of
different co-integrating vectors is less than or perhaps equal to a general alternative. Second statistic, tests Ho
that the number of co-integrating vectors is r against the alternative of r +1 co-integrating vectors.
Error Correction Model:
If variables are co-integrated then according to Engle and Granger (1987:255), an error correction term exists
between the variables that bring together the long-run relationship alongside the short-run dynamics of the
model.
The error correction can be obtained as:
lnEct = 1 +  Zt-1 +  i lnEct-i + ψi lnYt-i + t……(c)
Where  is the first difference operator, Zt-1 is the error correction term and the parameter  is the error
correction coefficient that measures the response of the regressand in each period to departures from
equilibrium.
RESULTS AND DISCUSSION
“ADF” test is used to test the order of integration. The test is conducted at level and at 1st difference. The results
given in this Table-1 indicate that all the variables are non-stationery at level. However, at 1st difference all the
variables become stationery, at 5% and 10% level of significance with the critical values 4.20 and 3.5
respectively, which indicates that all the variables are integrated of order one I(1).
Table 1. ADF Unit Root Test
Level 1st Difference
Variables Result
Intercept Intercept & Trend Intercept Intercept & Trend
LNY -1.90 -2.76 -2.78 -4.30* I(1)
LNAC 2.11 4.40 -2.47 -3.55** I(1)
LNFER -0.18 -3.38 -1.83 -5.7* I(1)
LNIR -1.50 -4.53 -8.67 -8.7* I(1)
LNIS 0.97 -1.13 -5.57 -5.52* I(1)
LNN 1.34 4.68 1.30 -5.34* I(1)
LNL 0.78 4.78 2.10 -4.87* I(1)
NOTE: * and ** Shows the data is stationary at 5% and 10% significance level respectively.
Johansen co-integration test has been used to determine the long run equilibrium between variables. The “FPE,
AIC and SC”, criterion indicates the optimal lag length as “1”. Table-2 shows the result of Johansen co-
integration test. Trace test indicates 4 co-integrating equations and maximum Eigen values indicate 1 co-
integrating equations at 5% level of significance, thus the null hypothesis of no co-integration can be rejected
and we can conclude that, there exists long run linear relationship between the variables.
Muhammad Zaheer Khan and Hina Gul. Im p a ct o f g re en re va l ua t io n va ria b le s… 458

The result of co-integration test indicates the possible presence of error correction term in the model, to
determine that vector error correction model is used. Results of VECM indicates that only agriculture credit
possess significant error correction term in the model. While other variable, don’t have any significant short run
effect in the model.
Table 2. Co-integration Test
(A)Trace Statistics
Hypothesized Trace 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**
None * 0.898047 199.5384 139.2753 0.0000
At most 1 * 0.776496 135.6077 107.3466 0.0002
At most 2 * 0.741849 93.65461 79.34145 0.0028
At most 3 * 0.634699 55.73670 55.24578 0.0452
At most 4 0.459570 27.53978 35.01090 0.2505
At most 5 0.307935 10.30884 18.39771 0.4512
At most 6 9.75E-05 0.002731 3.841466 0.9558
Trace test indicates 4 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Granger causality test with in error correction framework is used to determine the direction of relationship
between all the variables. The result given in table-5, shows that there exist bidirectional causality between FER
and Y. Unidirectional causality runs from IS to Y and LB to Y. Bidirectional causality exists between FER and
AC and unidirectional causality running from LB to AC. Unidirectional causality exist between IR and FER and
direction of relationship runs from IR to FER. Bidirectional causality exist between IS and LB and
unidirectional causality running from LA to IS. Unidirectional causality running from IS to IR and from AC to
IR. Bidirectional causality exists between AC and LB, bidirectional causality also exist between IS and LB.
finally the results indicate unidirectional causality running form Y to LA, AC to LA and FER to LA.
(B) Eigenvalue Statistics
Hypothesized Max-Eigen 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**
None * 0.898047 63.93074 49.58633 0.0009
At most 1 0.776496 41.95307 43.41977 0.0716
At most 2 * 0.741849 37.91791 37.16359 0.0409
At most 3 0.634699 28.19693 30.81507 0.1011
At most 4 0.459570 17.23093 24.25202 0.3205
At most 5 0.307935 10.30611 17.14769 0.3696
At most 6 9.75E-05 0.002731 3.841466 0.9558
Max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Sarhad J. Agric. Vol.29, No.3, 2013 459

Table 4. Error Correction Model

Error Correction: D(Y) D(LB) D(AL) D(AC) D(FER D(IR) D(IS)
CointEq1 -0.007840 0.000895 2.812374 -10.89638 0.125967 -0.000398 0.012745
(0.01494) (0.00084) (0.61903) (3.20103) (0.06064) (0.00126) (0.00845)
[-0.52460] [ 1.06933] [ 4.54321] [-3.40402] [ 2.07745] [-0.31652] [ 1.50906]

D(AGP(-1)) -0.214350 -0.004257 -41.08029 60.78216 0.335943 0.003006 -0.243632

(0.22751) (0.01274) (9.42407) (48.7325) (0.92311) (0.01916) (0.12858)
[-0.94217] [-0.33406] [-4.35908] [ 1.24726] [ 0.36393] [ 0.15689] [-1.89478]

D(LB(-1)) -4.668466 -0.438869 -79.30326 -845.8099 1.160829 0.387894 3.697845

(3.81292) (0.21355) (157.944) (816.737) (15.4709) (0.32115) (2.15496)
[-1.22438] [-2.05512] [-0.50210] [-1.03560] [ 0.07503] [ 1.20783] [ 1.71597]

D(AL(-1)) 0.000755 0.000133 -0.218311 -0.040609 -0.002601 -0.000178 -0.001995

(0.00265) (0.00015) (0.10986) (0.56810) (0.01076) (0.00022) (0.00150)
[ 0.28467] [ 0.89336] [-1.98717] [-0.07148] [-0.24172] [-0.79553] [-1.33119]

D(AC (-1)) -0.000697 0.000147 0.160353 -0.239951 0.010386 -3.74E-05 0.001696

(0.00150) (8.4E-05) (0.06204) (0.32081) (0.00608) (0.00013) (0.00085)
[-0.46510] [ 1.75102] [ 2.58471] [-0.74796] [ 1.70909] [-0.29633] [ 2.00381]

D(FER(-1)) -0.127238 0.001027 14.79507 -14.16886 0.312706 0.004136 0.024566

(0.06561) (0.00367) (2.71766) (14.0532) (0.26620) (0.00553) (0.03708)
[-1.93940] [ 0.27959] [ 5.44404] [-1.00823] [ 1.17470] [ 0.74853] [ 0.66251]

D(IR(-1)) -5.653474 -0.028090 -74.02581 99.25708 -1.279632 -0.327519 -2.412639

(2.55744) (0.14323) (105.937) (547.809) (10.3768) (0.21540) (1.44539)
[-2.21060] [-0.19611] [-0.69877] [ 0.18119] [-0.12332] [-1.52048] [-1.66919]

D(IS(-1)) 0.508987 -0.041397 -7.449017 -29.97608 -3.044960 -0.004950 -0.274882

(0.41643) (0.02332) (17.2499) (89.2003) (1.68967) (0.03507) (0.23535)
[ 1.22226] [-1.77496] [-0.43183] [-0.33605] [-1.80211] [-0.14114] [-1.16795]

C 16.06844 -1.302742 -2122.782 10539.48 15.35643 2.334783 0.900229

(15.4240) (0.86385) (638.912) (3303.86) (62.5829) (1.29911) (8.71722)
[ 1.04178] [-1.50807] [-3.32250] [ 3.19005] [ 0.24538] [ 1.79721] [ 0.10327]

Table 5. Granger Causality Test

Dependent Independent
LNY LNAC LNFER LNIS LNIR LNLB LNLA
LNY -- 0.14 1.62** 7.76* 0.81 1.49* 0.08
LNAC 0.05 -- 5.71** 0.00 0.56 1.07** 0.05
LNFER 1.44** 3.15** -- 0.00 4.143* 0.00 0.05
LNIS 0.45 0.06 0.46 -- 0.11 2.49** 1.77*
LNIR 0.52 2.89* 0.63 1.13* -- 1.45* 0.89
LNLB 0.11 3.06** 0.07 3.15** 0.03 -- 0.79
LNLA 9.95* 6.68* 11.34* 0.18 0.48 0.21 ---
NOTE:*Shows the one way causality and **Shows the two way causality.

CONCLUSIONS AND RECOMMENDATIONS

The focus of this study was to analyze the agriculture development; disparity in agriculture productivity and
sources of agriculture growth, in the process the speed and spread of Green Revolution was analyzed. Based on
the economic theory (literature), the major sources of productivity growth were identified which includes,
“fertilizer, irrigation and improved seed”. Agriculture credit was included in the model due to its importance in
facilitating the small farmers in overcoming their financial problems, while labour force participation was
included to measure the participation rate of agriculture labour. Results indicate the presence of long run
relationship between the variables. However, in the short run only agri-credit was found to affect the model.
Muhammad Zaheer Khan and Hina Gul. Im p a ct o f g re en re va l ua t io n va ria b le s… 460

Results of granger causality test indicate that the use of fertilizers, improved seeds can significantly influence
the productivity of agriculture sector of Pakistan. In addition, labour force employed in agriculture sector also
found to be an efficient and effective means of production.
Thus, the acceleration of agricultural production requires simultaneous use of these inputs. Production of crops
were supported by the widespread of Green Revolution i.e. spread of improved seeds, fertilizer, irrigation,
agriculture credit were widely common.
Our analysis suggests that there is a need to provide more modern inputs for the progress in agriculture sector of
Pakistan as it is evident that there is a lot of room for improvement. Most of the modern inputs are directly and
indirectly controlled by public sector, it is necessary that the public policies may be focused on equitable
distribution of technology and modern inputs in all the areas of Pakistan. By doing so, the underdeveloped areas
can be brought into the mainstream of Pakistan’s economy.
REFERENCES
Afzal, M. 1973. Implications of the Green Revolution for Land Use Patterns and Relative Crop Profitability under
Domestic and International Prices. Pak. Dev. Rev. 12(2): 135-147.
Ahmed, M., M. Paul, V. Preckel, and S. Ehui. 2006. Modelling the Impact of credit on intensification in mixed
crop-livestock systems: A Case study from Ethiopia. Poster paper prepared for presentation at the
international association of agricultural economists conference, Gold Coast, Australia.
Chaudhary, M. A. 1985. Food Self-sufficiency, Agricultural Adequacy and Impacts of Green Revolution in
Pakistan. Pak. E.S. Rev. 23(2): 95-112.
Chaudhary, M. G. 1973. Rural Income Distribution in Pakistan the Green Revolution Perspective. Pak. Dev. Rev.
12(3): 247-258.
Chaudhary, M. G. 1982. Green Revolution and Redistribution of Rural Incomes: Pakistan’s Experience. Pak. Dev.
Rev. 21(3): 173-205.
Chaudhary, M. H. 1994. Regional Agricultural Underdevelopment in Pakistan. Pak. Dev. Rev. 33(4): 889-898.
Javed. H., Farooq. Z and M. Ali. 2010. Technology transfer and agricultural Pakistan. Pak. J. Agri. Sci. 47(1): 82-
87.
Khan, M.H. 1983. Green Revolution and Redistribution of Rural Incomes: Pakistan’s Experience-A Comment.
Pak. Dev. Rev. 22(1): 47-56.
Khan, M.H. and D. Maki. 1980. Relative Efficiency by Farm Size and the Green Revolution in Pakistan. Pak .Dev.
Rev. 19(1): 51-64.
Khan, M.H. and S.A. Saeed. 1982. Growth and Fluctuations in the output of major crops in Pakistan 1950-51 to
1979-80. Pak. Dev. Rev. 21(2): 149-158.
Mohammad, F. 1986. Wealth Effects of the Green Revolution in Pakistan. The Pak. Dev. Rev. 25(4): 489-513.
Rauf, A.A. 1991. Education and Technical Efficiency during the Green Revolution in Pakistan. Eco. Dev. and
Cultural Change, Vol. 39(3): 651-665.
Siddiqi, W.M., Mazhar-ul-Haq, M and N. Kishwer. 2004. Institutional credit: A policy tool for enhancement of
agricultural income of Pakistan. Int. Res. J. of Arts & Hum. Vol, 37.
Zuberi, H. A. 1989. Production function, institutional credit and agriculture development in Pakistan. Pak. Dev.
Rev. 28:1.