Convergence of European wheat yields

The paper makes several contributions to the study of wheat yield changes in Europe and the resulting economic consequences in the near to medium term future. In particular, it addresses the issue of the effects of yield changes on land use. The transition and growth of yields are estimated using a combination of convergence, time-series and dynamic panel models. Scenarios are then run using estimated yields as input into a computable general equilibrium (CGE) model. The CGE model provides a narrative framework through which the total economic impact of changes in yields can be analyzed. Together, the complementary approaches of econometrics and general equilibrium models allow a more complete economic analysis of the consequences of yield changes for this important biofuels crop to emerge. Although there is no evidence of a common rate of yield convergence across Europe, there is evidence of absolute convergence. Standard time series and panel forecasting methods indicate the potential for only very modest yearly yield increases across most of Europe given optimistic assumptions; although potential yearly increases in newer European states could, in some cases, be substantially higher. However, the total amount of land released as a result of potential yield increases in the wheat sector is only modest because of an increase in demand for land by sectors other than wheat. The overall question of whether significant yield increases will necessarily lead to large increases in land available to produce bio-energy crops is rejected. Land freed by wheat yield increases will go to the production of a wide range of agricultural products that value it as an input. The same reasoning which links yields and land use applies to all agricultural products when there are well functioning markets.