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Nonparametric Estimates of the Components of Productivity and Profitability Change in U.S. Agriculture

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  • Christopher J. O'Donnell

Abstract

Recent theoretical advances in total factor productivity (TFP) measurement mean that TFP indexes can now be exhaustively decomposed into unambiguous measures of technical change and efficiency change. To date, all applications of this new methodology have involved decomposing indexes that have poor theoretical properties. This article shows how the methodology can be used to decompose a new TFP index that satisfies all economically-relevant axioms from index theory. The application is to state-level data from 1960 to 2004. In most states, the main drivers of agricultural TFP change are found to have been technical change and scale and mix efficiency change. Copyright 2012, Oxford University Press.

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  • Christopher J. O'Donnell, 2012. "Nonparametric Estimates of the Components of Productivity and Profitability Change in U.S. Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(4), pages 873-890.
    • Handle: RePEc:oup:ajagec:v:94:y:2012:i:4:p:873-890
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    1. Catherine J. Morrison Paul & Richard Nehring & David Banker, 2004. "Productivity, Economies, and Efficiency in U.S. Agriculture: A Look at Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1308-1314.
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    3. V. Eldon Ball & Charles Hallahan & Richard Nehring, 2004. "Convergence of Productivity: An Analysis of the Catch-up Hypothesis within a Panel of States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1315-1321.
    4. C.J. O'Donnell, 2010. "DPIN Version 1.0: A Program for Decomposing Productivity Index Numbers," CEPA Working Papers Series WP012010, School of Economics, University of Queensland, Australia.
    5. Christopher J. O'Donnell, 2010. "Measuring and decomposing agricultural productivity and profitability change ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 527-560, October.
    6. Capalbo, Susan Marie, 1988. "Measuring The Components Of Aggregate Productivity Growth In U.S. Agriculture," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(1), pages 1-10, July.
    7. C.J. O'Donnell, 2008. "An aggregate quantity-price framework for measuring and Decomposing productivity and profitability change," CEPA Working Papers Series WP072008, School of Economics, University of Queensland, Australia.
    8. Paul, Catherine J. Morrison & Nehring, Richard, 2005. "Product diversification, production systems, and economic performance in U.S. agricultural production," Journal of Econometrics, Elsevier, vol. 126(2), pages 525-548, June.
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