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Summary of Recent Findings

It is widely agreed that increased productivity is the main contributor to economic growth in U.S. agriculture. The level of U.S. farm output was about 2.7 times its 1948 level in 2013, growing at an average annual rate of 1.52 percent. Aggregate input use increased at a modest 0.05 percent annually in the same period, so the positive growth in farm sector output was very substantially due to productivity growth, which increased at an average 1.47 percent per year. But what exactly is productivity?

Single-factor measures of productivity, such as corn production per acre (yield or land productivity) or per hour of labor (labor productivity), have been used for many years because the underlying data are often easily available. While useful, such measures can also mislead. For example, yields could increase simply because farmers are adding more of other inputs, such as chemicals, labor, or machinery, to their land base. USDA produces measures of total factor productivity (TFP), taking account of the use of all inputs to the production process.

Specifically, annual productivity growth is the difference between growth of agricultural output and the growth of all inputs taken together. Productivity, therefore, measures changes in the efficiency with which inputs are transformed into outputs. USDA also produces State-level productivity measures (annual growth rates as well as cross-State differences in levels) of productivity, or differences in output per unit of combined inputs. Input measures are adjusted for changes in their quality, such as improvements in the efficacy of chemicals and seeds, changes in the demographics of the farm workforce, or innovations in machinery design. As a result, agricultural productivity is driven by innovations in onfarm tasks, changes in the organization and structure of the farm sector, and research aimed at improvements in farm production. In the short-term, measured agricultural productivity can also be affected by random events like weather.

  • U.S. agricultural productivity growth compares favorably to agricultural productivity growth in other industrialized countries, and to productivity growth in the overall U.S. economy, see Ball et al. (2010), for example.
  • The level of U.S. farm output more than doubled between 1948 and 2013, growing at an average annual rate of 1.52 percent. Aggregate input use increased at a modest 0.05 percent annually in the same period, so the positive growth in farm sector output was very substantially due to productivity (sometimes referred to as total factor productivity, or TFP) growth, which increased at an annual 1.47 percent over the 1948-2013 period.
  • During the 2007-13 subperiod, growth in output maintained an average annual rate of about 0.9 percent, comparable to that in the 2000-07 subperiod (the subperiods are measured from cyclical peak-to-peak in aggregate economic activity). During 2007-13, however, input use declined 0.54 percent per year (compared to increasing 0.32 percent per year over 2000-07), and measured average annual TFP growth rate rebounded from 0.6 percent during 2000-07 to 1.45 percent during 2007-13.

The full detail of national-level data are available in table 1, and a summary of agricultural output, input, and TFP change by subperiods is available in table 2.

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USDA also produced, through 2004, State-level productivity measures (annual growth rates as well as cross-State differences in levels) of productivity, or differences in output per unit of combined inputs.

  • Analysis of the individual States reveals a positive and generally substantial average annual rate of productivity growth (see table 21). There was considerable variance, however. The median rate of growth over the 1960-2004 period was 1.67 percent per year. However, 9 of the 48 States had productivity growth rates averaging more than 2 percent per year. Only Oklahoma and Wyoming had average annual growth rates less than 1 percent per year. The reported average annual rates of growth ranged from 0.58 percent for Oklahoma to 2.58 percent for Oregon.
  • Cumulated over the entire 45-year period covered by the State accounts, productivity growth in Oklahoma was responsible for only a 30 percent increase in that State's production. Over the same period, TFP growth in Oregon caused output in that State to increase by 319 percent between 1960 and 2004.
  • The wide disparity in productivity growth rates had a significant impact on the rank ordering of States (see table 22). A key economic question is whether States with lower levels of productivity tend to grow faster than the technology leaders: are there forces (e.g., the diffusion of technical knowledge from the leading States to the more backward ones) that lead to convergence over time in the levels of productivity? See the States section in the summary of recent findings discussion for details.

 

 

Last updated: Thursday, September 22, 2016

For more information contact: Eldon Ball, Sun Ling Wang, and Richard Nehring