Measuring and decomposing agricultural productivity and profitability change

O'Donnell, Christopher J. (2010) Measuring and decomposing agricultural productivity and profitability change. Australian Journal of Agricultural and Resource Economics, 54 4: 527-560. doi:10.1111/j.1467-8489.2010.00512.x

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Author O'Donnell, Christopher J.
Title Measuring and decomposing agricultural productivity and profitability change
Journal name Australian Journal of Agricultural and Resource Economics   Check publisher's open access policy
ISSN 1364-985X
Publication date 2010-10
Year available 2010
Sub-type Article (original research)
DOI 10.1111/j.1467-8489.2010.00512.x
Volume 54
Issue 4
Start page 527
End page 560
Total pages 34
Place of publication Carlton, Vic. Australia
Publisher Blackwell
Collection year 2011
Language eng
Abstract Profitability change can be decomposed into the product of a total factor productivity (TFP) index and an index measuring changes in relative prices. Many TFP indexes can be further decomposed into measures of technical change, technical efficiency change, scale efficiency change and mix efficiency change. The class of indexes that can be decomposed in this way includes the Fisher, Törnqvist and Hicks–Moorsteen TFP indexes but not the Malmquist TFP index of Caves, Christensen and Diewert (1982). This paper develops data envelopment analysis methodology for computing and decomposing the Hicks–Moorsteen index. The empirical feasibility of the methodology is demonstrated using country-level agricultural data covering the period 1970–2001. The paper explains why relatively small countries tend to be the most productive, and why favourable movements in relative prices tend to simultaneously increase net returns and decrease productivity. Australia appears to have experienced this relative price effect since at least 1970. Thus, if Australia is a price-taker in output and input markets, Australian agricultural policy-makers should not be overly concerned about the estimated 15 per cent decline in agricultural productivity that has taken place over the last three decades.
Keyword Economies of scale
economies of scale
Mix efficiency
Scale efficiency
Technical change
Technical efficiency
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Article first published online: 28 September, 2010.

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2011 Collection
School of Economics Publications
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Citation counts: TR Web of Science Citation Count  Cited 44 times in Thomson Reuters Web of Science Article | Citations
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Created: Mon, 06 Dec 2010, 14:17:31 EST by Alys Hohnen on behalf of School of Economics