Most Pacific Island Countries (PICs) rely heavily on the agricultural sector for food, security and source of economic growth. Thus, with the increasing population, especially in the Melanesian and Micronesian countries, and desire for higher incomes, agricultural productivity has to be increased through efficiency gains and technical progress. But, the pertinent question is; how well have they done in these areas in the past? An analysis shows that in most countries, while production in the crop and livestock sector has increased, the per capita production has decreased. Moreover, estimates of the total factor productivity reveal little gain over the past four decades. The most striking result is that, efficiency has declined in all countries considered in the study. The result of this paper is the identification of the causes of such trends, and suggestion of policy measures that can be implemented for raising agricultural productivity.

In Pacific Island Countries (PICs), most of the people live in rural areas and depend heavily for their livelihoods on agricultural activities. With the exception of the Polynesian countries, the population of these small countries are growing quite rapidly. For this reason and because prospects for income growth and improvements in welfare depend so heavily on agriculture, the productivity performance of the agricultural sector is critical to the food security of these nations. Many developing countries made the mistake of believing that the agricultural sector could not be important in economic growth and development. For a long period there was an emphasis on promoting growth through industrialization by means of protection of manufacturing industries and heavy state involvement in such activities. This policy failed miserably. Moreover, it held back development of the agricultural sector by raising the costs of agricultural inputs and forcing the exchange rate to be higher than it otherwise would be. There is now greater awareness of the important role of growth in the agricultural sector in promoting growth in the whole economy and reduction of poverty.

Agricultural productivity growth depends upon two factors: Improvements in resource allocation, i.e., gains from using existing resources in ways that lead to higher production with the existing technologies (efficiency gains), and technical change, i.e., new ways of using existing resources or changes in existing resources that lead to higher output. How have the PICs fared in respect of these two components of agricultural productivity? The answer to this question will provide some clues as to whether there is increasing poverty and food insecurity in the rural areas—a matter of considerable debate in these countries. The analysis reported below provides estimates of the changes in agricultural productivity in several of the PICs. We draw on the results to speculate about the causes of the changes estimated.