What is the appropriate level of aggregation for productivity indices? Comparing district, regional and national measures

Abstract

This paper examines the appropriate level of aggregation for the construction of total factor productivity (TFP) indices. The dataset covers the magisterial districts and statistical regions of the Western Cape for the years 1952 to 2002. Over these five decades agricultural production in the Western Cape grew twice as fast as in the country as a whole but this average masks substantial regional variation. Results show that TFP growth was negative in the Karoo, moderate in the Swartland, Overberg and Southern Cape, and generally above 2% per year in the Boland and Breede River Valleys, where there is extensive irrigation.