Behind the Data

Growth in Postwar Agriculture: The Key Role of Productivity

Growth in agricultural output results from increased use of one or more inputs (capital, land, labor, and materials) and from growth in productivity, which reflects investments in research and development, extension, education, and infrastructure. Each input’s contribution to output growth equals the product of the input’s growth rate and its respective share of total production cost.

The output of U.S. agriculture grew 1.78 percent per year on average from 1948 to 1999. Increasing productivity accounted for 94 percent of growth in agricultural output, compared with 32 percent in the rest of the economy.

The singularly important role of productivity growth in agriculture is made all the more remarkable by the contraction in labor input. Over the full 1948-99 period, labor input declined 2.4 percent per year, on average. When weighted by its 0.25 share of total cost, the contraction in labor input contributed -0.61 percentage point per year on average to agricultural output growth.

Land’s contribution to growth in agricultural output was also negative, reflecting substitution of capital and materials for land. Over 1948-99, land contributed -0.05 percentage point per year to the sector’s output growth.

Capital’s contribution to agricultural output was generally positive, but small, averaging only a fraction of a percent. Material inputs, such as fertilizers, pesticides, and seeds, contributed a positive rate, averaging 0.76 percentage point per year to growth of output, enough to outweigh the negative contributions of labor and land.

When the net contributions of all four quantifiable inputs to agricultural output growth are accounted for over 1948-99, they explain only about one-tenth of 1 percentage point—less than 6 percent—of the average annual rate of growth. Even after accounting for changes in quality of the inputs—like the increased technology embedded in material inputs, the greater sophistication of capital inputs, and the greater skill and education embodied in peopleworking on farms—changes in productivity alone emerge as the key component responsible for agricultural output growth.

Sources of output growth in the U.S. farm sector
Source of growth 1948-53 1953-57 1957-60 1960-66 1966-69 1969-73 1973-79 1979-89 1989-99 Overall, 1948-99
Weighted percentage point contribution to total output growth
Labor -1.11 -1.01 -0.72 -1.05 -1.01 -0.27 -0.69 -0.40 -0.09 -0.61
Capital 0.58 0.16 0.06 0.11 0.37 0.15 0.36 -0.56 -0.24 0.01
Land 0.02 -0.09 -0.08 -0.03 -0.09 -0.17 0.00 -0.05 -0.05 -0.05
Materials 1.54 1.44 1.56 0.90 0.34 0.96 1.39 -0.76 0.96 0.76
Total factor productivity 0.04 0.53 3.30 1.32 2.58 2.03 1.21 2.71 1.54 1.68
Growth rate (percent)
Total output growth 1.07 1.02 4.13 1.24 2.20 2.70 2.26 0.93 2.12 1.78
Source: ERS data product on agricultural productivity.