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Productivity in the Australian Dairy Industry

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  • Kompas, Tom
  • Che, Tuong Nhu

Abstract

Although the Australian dairy industry has performed well it has also faced considerable pressure over the past twenty years. A decline in the terms of trade and major structural change has provided added incentives for the industry to improve productivity. This paper constructs Tornqvist index values to measure and analyse movements in inputs, outputs, total factor productivity (TFP) and the terms of trade for the dairy industry as a whole and for each state over the years 1979 to 1999. Overall, there is clear evidence of a significant increase in the TFP index in the 1990s relative to the 1980s. However, in terms of fitted annual growth rates, there is also evidence of a productivity 'slow down' in the 1990s, with the principal exception of New South Wales. Average annual growth in dairy total factor productivity in Australia over the entire twenty-year period is 1.5 per cent, but decreases from 1.8 per cent in the first to 0.9 per cent in the second decade. In Victoria, the largest dairy producer, the growth in TFP in the second decade of the study is virtually zero, with poor weather conditions in the second half of the decade partly to blame. Much of the impressive growth in dairy output in the 1990s can thus be simply attributed to a growth in inputs. Index values for the terms of trade, the share of input costs in total costs and potential drives of productivity change are also examined.

Suggested Citation

  • Kompas, Tom & Che, Tuong Nhu, 2004. "Productivity in the Australian Dairy Industry," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 12.
  • Handle: RePEc:ags:auagre:132077
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    References listed on IDEAS

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    1. Knopke, Philip, 1988. "Measuring Productivity Change Under Different Levels Of Assistance: The Australian Dairy Industry," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 32(02-03).
    2. 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.
    3. Topp, Vernon & Williamson, G. & Lembit, Murray & Beare, Stephen, 1989. "The Resource Costs of Blended Milk Pricing in Victoria," 1989 Conference (33rd), February 7-9, 1989, Christchurch, New Zealand 144830, Australian Agricultural and Resource Economics Society.
    4. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    5. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March.
    6. 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, April.
    7. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    8. Philip Knopke, 1988. "Measuring Productivity Change Under Different Levels Of Assistance: The Australian Dairy Industry," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 32(2-3), pages 113-128, 08-12.
    9. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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    Citations

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    Cited by:

    1. Graham, Mary, 2009. "Developing a social perspective to farm performance analysis," Ecological Economics, Elsevier, vol. 68(8-9), pages 2390-2398, June.
    2. Watson, Alistair S., 2005. "Productivity and the Dairy Industry," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 13.
    3. Chad Turner & Robert Tamura & Sean Mulholland, 2013. "How important are human capital, physical capital and total factor productivity for determining state economic growth in the United States, 1840–2000?," Journal of Economic Growth, Springer, vol. 18(4), pages 319-371, December.
    4. Kelvin Balcombe & Hristos Doucouliagos & Iain Fraser, 2007. "Input usage, output mix and industry deregulation: an analysis of the Australian dairy manufacturing industry ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(2), pages 137-156, June.
    5. Tom Kompas & Tuong Nhu Che, 2006. "Technology choice and efficiency on Australian dairy farms ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 65-83, March.

    More about this item

    Keywords

    Productivity Australia dairy industry Tornqvist index values inputs outputs total factor productivity; Agribusiness; Farm Management; International Relations/Trade; Livestock Production/Industries; Marketing; Production Economics; Productivity Analysis; ISSN 1442-6951;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O39 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Other
    • Q19 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Other

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