The impact of trade liberalisation on South African agricultural productivity
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This study attempts to examine the empirical relationship between trade and total factor
productivity (TFP) in the agricultural sector using both cross -sectiona, (across nine
agricultural commodities), and time -series analysis. The Error Correction Model of
ordinary least square (OLS) results from the cross -sectional analysis confirm that export
shares and capital formation were found to be positive and significant; whereas, import
shares and real exchange rate were found to be related negatively. However, the net effect of
export and import shares had a positive effect. This implies that trade liberalisation causes
productivity gains. Moreover, the time -series analysis goes in the same direction as the
cross -sectional results, showing that there is a robust relationship among TFP, degree of
openness, and capital formation. Whereas, debt was found to be inversely related, this
implies that agricultural industries / farmers lack debt management skills.