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Total Factor Productivity as a Measure of Weak Sustainability

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  • Nanere, Marthin
  • Fraser, Iain

Abstract

Analysis of agricultural production generally ignores the undesirable outputs (such as soil erosion) that are jointly produced with desirable, marketable outputs. In this paper we present preliminary TFP results incorporating national level data for off-site damage costs for soil erosion for broadacre agriculture between 1953 and 1994. Following the approach introduced by Repetto et al. (1996) our revised TFP estimates provide interesting results. When we assume that damage costs per ton of soil erosion are constant our TFP estimates are higher than estimates omitting the undesirable output. This result can be explained by the fact that the rate of soil erosion grew slower than output increased or the rate of soil erosion declined and agricultural output remained constant. Defining weak sustainability (i.e., allowing substitution between natural and human capital) as non-declining TFP our results indicate that Australian broadacre agriculture is sustainable. Note our results are only preliminary because there are other externalities that we do not include in the analysis and the existing soil erosion damage cost data is very weak.

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Bibliographic Info

Paper provided by Australian Agricultural and Resource Economics Society in its series 2001 Conference (45th), January 23-25, 2001, Adelaide with number 125797.

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Date of creation: Jan 2001
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Handle: RePEc:ags:aare01:125797

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Keywords: undesirable outputs; total factor productivity; non-declining TFP.; Productivity Analysis;

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  1. Fischer, Stanley, 1988. "Symposium on the Slowdown in Productivity Growth," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 3-7, Fall.
  2. V. Kerry Smith, 1998. "Should Pollution Reductions Count as Productivity Gains for Agriculture?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 591-594.
  3. Frank M. Gollop & Gregory P. Swinand, 1998. "From Total Factor to Total Resource Productivity: An Application to Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 577-583.
  4. Denis Lawrence & Lloyd McKay, 1980. "Inputs, Outputs And Productivity Change In The Australian Sheep Industry," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 24(1), pages 46-59, 04.
  5. Lawrence, Denis & McKay, Lloyd, 1980. "Inputs, Outputs And Productivity Change In The Australian Sheep Industry," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(01), April.
  6. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-74, August.
  7. Barbera, Anthony J. & McConnell, Virginia D., 1990. "The impact of environmental regulations on industry productivity: Direct and indirect effects," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 50-65, January.
  8. Pittman, Russell W, 1983. "Multilateral Productivity Comparisons with Undesirable Outputs," Economic Journal, Royal Economic Society, vol. 93(372), pages 883-91, December.
  9. Fare, R. & Grosskopf, S. & Pasurka, C., 1986. "Effects on relative efficiency in electric power generation due to environmental controls," Resources and Energy, Elsevier, vol. 8(2), pages 167-184, June.
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