Investigating the Relationship between the Diversity of Productive Activities and Total Factor Productivity in Agriculture Sector

Abstract
Sufficient use of resources in production is not only an objective but also is a vital issue. Considering diversification in agricultural activities can improve total factor productivity, therefore in this study effective factors on total factor productivity of agricultural sector with a special emphasis on weight and direction of activity diversification is investigated. For this purpose, Autoregressive Distributed Lag (ARDL) model was used to examine the factors affecting on total factor productivity. The long-term results show that there is a significant and positive relationship between the level of diversity of agricultural activities and total factor productivity. In other word, by one percent increase in agricultural diversity index, total factor productivity increase about 15.67 percent. Error correction term coefficient is – 0.61 which show that 61% of total factor productivity deviation can be adjusted in each period. So, government can apply a comprehensive plan to identify potentials of different regions. Moreover, to encourage diversification in agriculture, different policies such as extension recommendations, creation of cultivation facilities of potential products and an integrated support can be applied.
JEL Classification: Q17, Q18, Q57

Keywords:
Iran, Agriculture, Total Factor Productivity, Diversity, ARDL Model, Bounded Test, Simpson Index