Nonparametric Estimates Of The Components Of Productivity And Profitability Change In U.S. Agriculture
Profitability change can be decomposed into the product of a total factor productivity (TFP) index and an index of relative price change. Oâ€™Donnell (2008) shows that the TFP index can be further decomposed into an index of technical change and various indexes of efficiency change â€“ these indexes measure changes in productivity resulting from movements in the production frontier, movements by firms towards the frontier, and movements by firms around the frontier to capture economies of scale and scope. The Oâ€™Donnell decomposition methodology can be applied in any multiple-input multiple-output setting, it makes no assumptions concerning the optimising behaviour of firms or the degree of competition in product markets, and it only involves components that can be unambiguously interpreted as measures of either technical change or efficiency change. This paper uses the methodology to decompose spatially - and temporally-transitive Lowe indexes of TFP change in U.S. agriculture for the period 1960-2004. To implement the methodology, data envelopment analysis (DEA) is used to estimate separate production frontiers for each of the ten farm production regions identified by the USDA Economic Research Service (ERS). California and Florida are found to be the most profitable and productive states. In most states, the main drivers of TFP change over the 45-year study period appear to have been technical change and scale and mix efficiency change. For example, Texas is found to have experienced a 40% increase in productivity due to technical change and a 32% increase in productivity due to economies of scale and scope, resulting in an overall productivity increase of 1.40 ! 1.32 â€“ 1 = 85%; in Tennessee, the combined effects of technical progress (122%), technical efficiency improvement (1%) and diseconomies of scale and scope (-24%) resulted in an net productivity increase of 2.22 ! 1.01 ! 0.76 â€“ 1 = 70%.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Web page: http://www.uq.edu.au/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- 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(01), July.
- 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.
- O'Donnell, Christopher J., 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), December.
- 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.
- O'Donnell, Christopher J., 2009. "Measuring And Decomposing Agricultural Productivity And Profitability Change," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47625, Australian Agricultural and Resource Economics Society.
- 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.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:qld:uqcepa:70. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SOE IT)
If references are entirely missing, you can add them using this form.