Publicly-funded UK agricultural R&D and 'social' total factor productivity

Most studies concerned with measuring the rate of return to publicly‐funded agricultural R&D investment have found high returns, suggesting under‐investment, and calls for increased expenditure have been common. However, the evaluation of returns tends to measure the effect of research expenditure against growth in total factor productivity (TFP), based on market inputs and outputs. When compared against growing public unease over the environmental effects of pursuing agricultural productivity growth, TFP indices become a misleading measure of growth. This paper integrates some non‐market components into the TFP index. The costs of two specific externalities of agricultural production, namely fertiliser and pesticide pollution, are integrated in a TFP index constructed for the period 1948–1995. This adjusted, or ‘social’, TFP index is measured against UK public R&D expenditures. The rates of return to agricultural R&D are reduced by using the ‘social’ as opposed to the traditional TFP index. Whilst both remain at justifiable levels, previous studies appear to have over‐estimated the effect of agricultural R&D expenditures. Furthermore, with changes in policy towards more socially acceptable but non‐productivity enhancing outcomes, such as animal welfare, rural diversification and organic farming, the future framework for analysing returns to agricultural R&D should not be so dependent on productivity growth as an indicator of research effectiveness.     

Deregulation reforms,resource reallocation and aggregate productivity growth in the Australian dairy industry

Deregulation reforms in the Australian dairy industry had long‐lasting repercussions for Australian agriculture and the wider Australian economy. Using farm‐level data from 1979 to 2013, we investigate the effect of these reforms on productivity in the Australian dairy industry which arose from correcting resource misallocation between farms and across segregated state milk markets. Our results demonstrate that after the dairy reforms in 2000, relative market share shifted from less productive farms to more productive ones, and between farms using different production systems – generating additional productivity gains for the farm sector, but imposing some costs on downstream manufacturers by strengthening the seasonality of milk supply. Lessons from the Australian experience provide timely guidance for those countries exploring deregulation now or in the future to improve the industry‐level agricultural productivity growth through facilitating resource reallocation from less efficient to more efficient farms.     

Measuring the sustainability and economic viability of tropical farming systems: a model from sub-Saharan Africa

New technologies must be developed in sub-Saharan Africa which are sustainable and economically viable. This paper discusses a methodology for measuring the agricultural sustainability and economic viability of tropical farming systems for new technology evaluation. The approach is based on the concept of interspatial and intertemporal total factor productivity, paying particular attention to valuation of natural resource stock and flows. Agriculture is a sector which utilizes natural resources (e.g. soil nutrients) and the stock and flows of these resources affect the production environment. However, in many cases, the stock of these resources is beyond the control of the farmer and must be accounted for in an agricultural sustainability and economic viability measurement. For example, soil nutrients are removed by crops, erosion or leaching beyond the crop root-zone, or other processes such as volatilization of nitrogen. Agricultural production can also contribute to the stock of some nutrients by leguminous plants such as agroforestry systems. Using a data set available at the International Institute of Tropical Agriculture, we compute the intertemporal and interspatial total factor productivity indices for four cropping systems in southwestern Nigeria using stock of major soil nutrients as the natural resource stock. Results show that the sustainability and economic viability measures are sensitive to changes in the stock and flow of soil nutrients as well as the material inputs and outputs. Where the contribution of natural resource stock and flows are important (such as in the case of alley cropping), the measures provide markedly different results from conventional TFP approaches. The advantage of this approach is that interspatial and intertemporal total factor productivity measures are computed using only price and quantity data, thus eliminating the need for econometric estimation.     

Ranking farms with a composite indicator of sustainability

The assessment of sustainability at farm level has been growing in popularity over the last few years. This article contributes to this line of research by building up composite indicators for different facets—social, economic, environmental, and global—of farm sustainability using a methodological approach that combines data envelopment analysis (DEA) and multicriteria decision making (MCDM) methods, and assigns common weights to each individual sustainability indicator. This approach is applied to a database of 163 farms located in the Campos County, a region belonging to the dry lands of the Spanish Northern Plateau, using 12 individual indicators of sustainability. Our findings show that both economic and environmental composite sustainability indicators are positively correlated, but that this is not the case for the social indicator. We also check the influence of a set of variables on farm sustainability using bootstrapping statistical techniques, and showing that increasing farm size, membership in agricultural cooperatives and farmers’ medium and upper agricultural‐specific technical education, all exert a significant positive influence on sustainability. These results provide clues for policy makers that intend to design sustainability‐increasing structural agricultural policies.     

Integrated economic-hydrologic water modeling at the basin scale: the Maipo river basin

Increasing competition for water across sectors increases the importance of the river basin as the appropriate unit of analysis to address the challenges facing water resources management; and modeling at this scale can provide essential information for policy makers in their resource allocation decisions. This paper introduces an integrated economic‐hydrologic modeling framework that accounts for the interactions between water allocation, farmer input choice, agricultural productivity, non‐agricultural water demand, and resource degradation in order to estimate the social and economic gains from improvement in the allocation and efficiency of water use. The model is applied to the Maipo river basin in Chile. Economic benefits to water use are evaluated for different demand management instruments, including markets in tradable water rights, based on production and benefit functions with respect to water for the agricultural and urban‐industrial sectors.     

Post-War Productivity Patterns in U.S. Agriculture: Influences of Aggregation Procedures in a State-Level Analysis

Annual data for forty-eight states are used to account for changes in the composition of input and output aggregates over space and time, and thereby to obtain new evidence on changes in inputs, outputs, and productivity in U.S. agriculture. The measures change significantly when we use state-specific rather than national prices and when we allow for changes in the composition of the aggregates, especially of labor and capital inputs. We compare our estimates and those reported by Ball et al. ( American Journal of Agricultural Economics 81(1999):164–79). The national estimates are similar but substantial differences are found in state-level productivity growth.     

Towards Agricultural Policy 3.0 – an agenda for agricultural research

This article reviews the development from market‐based support measures (‘Agricultural Policy 1.0’) towards direct and decoupled payments (‘Agricultural Policy 2.0’) which are increasingly justified by environmentally friendly practices (‘Agricultural Policy 2.1’) to which payments are bound. It describes frequent problems connected with today's agri‐environmental programmes, particularly non‐compliance and a too indirect link between practices paid for and environmental effects. Other programmes have started to pay farmers more directly for environmental outputs on their fields, such as the number of valuable plants on their grassland. Transaction costs for the administration and control of these programmes have been shown to remain at an acceptable level, so that such output‐related policies may be effective and promising options. It is suggested to direct the work of agricultural researchers, including economists, into looking for a stronger link between environmental outputs and public support, something that could be termed Agricultural Policy 3.0. This could lend some more visibility, relevance and attractiveness to our discipline .     

The impact of grain self‐sufficiency regime on regional welfare and agricultural productivity in China

The nineties’ agricultural reforms in China that were aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural input prices; this apparently motivated the government to introduce the grain self‐sufficiency regime in 1998. We examine how and to what extent this reform affected the productivity and welfare of grain farmers in China at the regional level. We find that the price regulations that destroyed the incentive to exert more effort adversely affected the growth in agricultural productivity but contributed to the growth in farmers’ welfare. Although the price regulations resulted in short‐term improvement in welfare across all the regions, in the long run such regulations can potentially result in larger drop in agricultural production because of its negative impact on the incentives to produce more.     

Are commodity prices chaotic?

We conduct tests for the presence of low‐dimensional chaotic structure in the futures prices of four important agricultural commodities. Though there is strong evidence of non‐linear dependence, the evidence suggests that there is no long‐lasting chaotic structure. The dimension estimates for the commodity futures series are generally much higher than would be for low dimension chaotic series. Our test results indicate that autoregressive conditional heteroskedasticity (ARCH)‐type processes, with controls for seasonality and contract‐maturity effects, explain much of the non‐linearity in the data. We make a case that employing seasonally adjusted price series is important in obtaining robust results via some of the existing tests for chaotic structure. Finally, maximum likelihood methodologies, that are robust to the non‐linear dynamics, lend strong support to the Samuelson hypothesis of maturity effects in futures price changes.     

Measuring agricultural total factor productivity in China: pattern and drivers over the period of 1978‐2016

The Chinese agricultural sector has experienced a substantial increase in total output since dramatic reforms were introduced in 1978. This paper uses the index method to measure agricultural total factor productivity (TFP) for China’s crop and livestock industries, based on the gross output model from 1978 to 2016. We construct production accounts for the industries using input‐output relationships for the 26 main agricultural commodities and commodity groups, which account for over 90 per cent of the total agricultural inputs and outputs. The results show that China’s agricultural TFP grew at a rate of approximately 2.4 per cent a year before 2009, which is comparable to the main OECD countries and is double the world average. TFP growth accounts for approximately 40 per cent of output growth, suggesting that input growth was the main driver of output growth in the past. However, average productivity growth slowed down after 2009 though it has gradually recovered since 2012. The slowdown reflects the emerging challenges to existing farm production practices in Chinese agriculture, suggesting the need for further institutional reform.     

The Challenge of Sustainability at the Farm Level: Presidential Address

The sustainability of farming systems is currently under debate. There is concern that technological and other changes have long-run consequences, which may compromise future levels of desired outputs from agricultural and other resources. The paper traces developments in the theory of sustainability and discusses their application at the farm level. Findings include firstly, that sustainability should be regarded as an emergent property of an agricultural system. Its operational definition at the farm level thus may not apply at other levels in the hierarchy. Secondly, whilst individual farmers may attach value to “sustainability” goods, they are unlikely to adopt socially optimal levels without regulation or incentive. Finally, since sustainability issues at the farm level are usually long-run, dynamic and have social dimensions, a central task for farm management researchers lies in investigations which allow tradeoffs between different sustainability criteria to be determined and then optimised according to society's norms.     

Resource reallocation and its contribution to productivity growth in Australian broadacre agriculture

This article uses farm survey data to measure the contribution of cross‐farm resource reallocation to industry‐level productivity growth in Australian broadacre agriculture. We show that resource reallocation between farms mainly occurred between incumbent farms and between farms with different productivity growth. Resource reallocation is estimated to account for around half of the industry‐level productivity growth that occurred between 1978 and 2010, and its contribution appears to have increased over time. Moreover, we also show that resource reallocation effects vary across different inputs, partly due to their different mobility. This analysis improves our understanding of how reforms targeting structural adjustment – and the resource reallocation this generates – can influence aggregate productivity growth.     

Beyond One‐Size‐Fits‐All: Differentiating Market Access Measures for Commodity Systems in the Kenyan Highlands

Market access measures employed by economists and spatial analysts may not adequately capture local market or product‐specific variation. Analysis is conducted on the effects of market access on two commodities in the Kenyan highlands: milk and bean seeds. Both simple and composite measures of market access are applied to spatial price formation models to create spatial price decay functions in the context of household‐specific transaction costs. Composite measures of market access include negative exponential (using travel time or distance as cost) and gravity measures. The results demonstrate that the effects of market access differ significantly depending on the particular goods of interest. Simple measures of market access have the advantage of being more easily interpretable, and should therefore be preferred when communicating research outputs to the non‐scientific community, especially decision‐makers. The implications are that research addressing commodity‐specific development questions needs to look beyond generic measures of market access and develop tailored measures that reflect the characteristics of the commodity system of interest. The analysis also demonstrates that spatial price formation can be used to generate potentially more accurate measures of unit‐distance marketing costs.     

The Struggle to Sustain Agriculture in EU Southern Neighbourhood Partners: Improving Data and Policies

The agricultural sector in the EU Southern Neighbourhood Partners (SNP) is struggling to respond to sustainability challenges. It needs stronger policies to deliver balanced sustainability outcomes in economic, social and environmental terms. Based on recent information and a structured assessment of the impacts of prevailing public policies on the sustainability of agriculture in Tunisia, Morocco, Egypt and Turkey, carried out within the Sustainmed project ( https://sustainmed.iamm.fr ), we conclude that several factors contribute to the struggles in strengthening sustainability functions of agriculture in these countries. In the main, there is a lack of policy coherence toward sustainability uncovered by the dual, unbalanced consideration given to different sustainability factors in the study countries: pure economic factors largely prevail over factors related to resource conservation and social and cultural values, these latter factors being a precondition for long-term economic growth. Consequently, there is a genuine need for a more consistent vision of sustainability issues in future policy agendas, including better data systems and specific policies to incentivise sustainable agriculture in the SNP; as the challenge over the coming decades in these countries will be to increase agricultural production and productivity while at the same time managing natural resources sustainably. Findings can guide policymakers and other stakeholders in the agricultural sector to identify pathways towards sustaining agriculture in the SNP.     

Elegy,ode or panegyric? Practising agricultural economics in Australia, 1975–99

Changes are investigated in the Australian agricultural economics profession, 1975–99, using a conventional microeconomics framework of supply and demand for agricultural economists. Aggregate exogenous factors such as changes in the agricultural and tertiary education sectors, and changes in beliefs about the proper role of government, have changed both supply and demand conditions for agricultural economists. The profession has responded by shifting its focus away from narrowly agricultural policy, especially marketing policy, towards areas of market failure such as environmental and natural resource issues.     

Measuring public agricultural research and extension and estimating their impacts on agricultural productivity: new insights from U.S. evidence

This article provides new estimates of the marginal product of public agricultural research and extension on state agricultural productivity for the U.S., using updated data and definitions, and forecasts of future agricultural productivity growth by state. The underlying rationale for a number of important decisions that underlie the data used in cost‐return estimates for public agricultural research and extension are presented. The parameters of the state productivity model are estimated from a panel of contiguous U.S. 48 states from 1970 to 2004. Public research and extension are shown to be substitutes rather than complements. The econometric model of state agricultural TFP predicts growth rates of TFP for two‐thirds of states that is less than the past trend rate. The results and data indicate a real social rate of return to public investments in agricultural research of 67% and to agricultural extension of 100+%. The article concludes with guidance for TFP analyses in other countries.     

Productivity and Environmental Performance in Marketing Cooperatives: An Analysis of the Spanish Horticultural Sector

The paper analyses the productivity of marketing cooperatives incorporating environmental inputs/outputs. In the European agriculture, expectations for attaining sustainable and competitive agriculture rely to a great extent on the cooperative sector's ability to adapt to new market conditions. These challenges have led marketing cooperatives in the fruit and vegetables sector to consider improvements in productivity and sound environmental performance. The study analyses the total factor productivity related to environmental variables in this sector using a parametric‐stochastic approach and panel data on Spanish cooperatives over the period 1994–2002. Additionally, the determinants of environmental productivity are examined econometrically. The estimates obtained show an increase in efficiency for the period under study and a relationship between productivity changes and management factors, such as labour quality, capital intensity and environmental spillover.     

Smallholders,institutional services,and commercial transformation in Ethiopia

This article examines the role of institutional services of credit, input supply, and extension in the overall commercial transformation process of smallholder agriculture in Ethiopia. Survey data collected in 2006 from 309 sample households in three districts of Ethiopia are used for the analyses. Tobit regression models are used to measure the effect of access to services on the intensity of inputs use for fertilizer and agrochemicals. A probit model is used to measure these effects on the adoption of improved seeds. Intensity of use of seeds is analyzed using an ordinary least squares model. Logarithmic Cobb–Douglass functions are estimated to analyze the effect of access to services on crop productivity. Heckman's two‐stage estimation is used to examine determinants of household market participation and the extents of participation. Results show that access to institutional support services plays a significant role in enhancing smallholder productivity and market orientation. Our results imply that expanding and strengthening the institutional services is critical for the intensification and market orientation of smallholder agriculture in Ethiopia. In particular, appropriate incentives and regulatory systems are urgently needed to encourage the involvement of the private sector in the provision of agricultural services.     

A Review of the Economics of Biological Natural Resources

The economics of renewable biological resources originated in the 1950s in fishery economics. The original models were static and linked simple population growth models to harvesting. In the 1970s the subject became more concerned with dynamic models and the stability of resource systems and this development continued in the 1980s. Now renewable resource economics is seen as a branch of capital theory which is distinct from mainstream capital theory because it must simultaneously represent the productivity of an ecosystem as well as the production functions of the firms which exploit it. Adding to this complex patterns of ownership over the resource itself and the dependence of production on the state of the ecosystem makes for a set of problems which economists have only started to address. Progress in renewable resource economics will come through closer collaboration with ecologists to give more realistic population models; the development of approaches for multi‐species ecosystems; and the use of modelling techniques and policies which can adapt as more information becomes available on the status of a resource. In the future renewable resource economics will continue to contribute to the sustainability debate by providing a clearer analysis of the trade‐off between ecosystem stability and the level of economic exploitation.     

Australasian environmental economics: contributions,conflicts and ‘cop‐outs’*

Australian and New Zealand environmental economists have played a significant role in the development of concepts and their application across three fields within their subdiscipline: non‐market valuation, institutional economics and bioeconomic modelling. These contributions have been spurred on by debates within and outside the discipline. Much of the controversy has centred on the validity of valuations generated through the application of stated preference methods such as contingent valuation. Suggestions to overcome some shortcomings in the work of environmental economists include the commissioning of a sequence of non‐market valuation studies to fill existing gaps to improve the potential for benefit transfer.