Productivity Growth

Contents

• Productivity Growth in World Agriculture: Sources and Constraints
• Agriculture in Development Thought
• Transition to Sustainability
• Perspective
• References

Productivity Growth in World Agriculture: Sources and Constraints

Prior to the beginning of the twentieth century, almost all increases in crop and animal production occurred as a result of increases in the area cultivated. By the end of the century, almost all increases were coming from increases in land productivity -- in output per acre or per hectare. This was an exceedingly short period in which to make a transition from a natural resource-based to a science-based system of agricultural production. In the presently developed countries, the beginning of tills transition began in the latter hall of the nineteenth century. In most developing countries, the transition did not begin until well into the second half of the twentieth century. For some of the poorest countries in the world, the transition has not yet begun.

During the second half of the twentieth century, world population more than doubled -- from approximately 2. 5 billion in 1950 to 6. 0 billion in 2000. The demands placed on global agricultural production arising out of population and income growth almost tripled. By 2050, world population is projected to grow to between 9 and 10 billion people. Most of the growth is expected to occur in poor countries, when the income elasticity of demand for food remains high. Even moderately high income growth, combined with projected population growth, could result in close to doubling the demands plated on the world's farmer's by 2050 (Johnson, 2000; United Nations, 2001).

The most difficult challenges will occur during the next two or three decades as both population and income in many of the world's poorest countries continue to grow rapidly. But rapid decline in the rate of population growth in such populous countries as India and China lends credence to the United Nations projections that by midcentury, the global rate of population growth will slow substantially. The demand for food ansing out of income growth is also expected to slow as incomes rise and the income elaslicity of demand for food declines. In the interim, very substantial increase in scientific and technical effort will be required, particularly in the world's poorest countries, if growth in food production is to keep pace with growth in demand.

Agriculture in Development Thought

Economic understanding of the process of agricultural development has made substantial advances over the last half-century. In the early post-World War II literature, agriculture, along with other natural resource-based industries, was viewed as a sector from which resources could be extracted to fund development in the industrial sector (Lewis, 1954, p. 139; Rostow, 1956; Ranis and Fei, 1961).

Growth in agricultural production was viewed as an essential condition, or even a precondition, for growth in the rest of the economy. But the process by which agricultural growth was generated remained outside the concern of most development economists.

By the early 1960s, a new perspective, more fully informed by both agricultural science and economics, was beginning to emerge. It had become increasingly clear that much of agricultural technology was "location specific. " Techniques developed in advanced countries were not generally directly transferable to less developed countries with different climates and resource endowments. Evidence had also accumulated that only limited productivity gains were to be had by the reallocation of resources within traditional peasant agriculture.

In an iconoclastic book, Transforming Traditional Agriculture, Theodore W. Schultz (1964) insisted that peasants in traditional agrarian societies are rational allocators of available resources and that they remained poor because most poor countries provided them with only limited technical and economic opportunities to which they could respond -- that is, they were "poor but efficient. " Schultz (1964, pp. 145-147) wrote:

The principle sources of high productivity in modern agriculture are reproducible sources. They consist of particular material inputs and of skills and other capabilities required to use such inputs successfully.... But these modern inputs are seldom ready made.... In general what is available is a body of knowledge, which has made it possible for the advanced countries to produce for their own use factors that are technically superior to those employed elsewhere. Tins body of knowledge can be used to develop similar, and as a rule superior, new factors appropriate to the biological and other conditions that are specific to the agriculture of poor countries.

This thesis implies three types of relatively high payoff investments for agricultural development: 1) the capacity of agricultural research institutions to generate new location-specific technical knowledge; 2) the capacity of the technology supply industries to develop, produce and market new technical inputs; and 3) the schooling and nonformal (extension) education of rural people to enable them to use me new knowledge and technology effectively. The enthusiasm with which this high-payoff input model was accepted and transformed into doctrine was due at least as much to the success of plant breeders and agronomists in developing fertilizer and management responsive "green revolution" crop varieties for the tropics as to the power of Schultz's ideas.

To my opinion, the Schultz "high-payoff input model" remained incomplete, however, even as a model of technical change in agriculture. It did not attempt to explain how economic conditions induce; in efficient path of technical change for the agricultural sector of a particular society. Nor does the high-payoff input model attempt to explain how economic conditions induce the development of new institutions, such as public sector agricultural experiment stations, that become the suppliers of location-specific new knowledge and technology.

Beginning in the early 1970s, Hayami and Ruttan (1971, 1985) and Binswanger and Ruttan (1978) formulated a model of induced technical change in which the development and application of new technology is endogenous to the economic system. Building on the Hicksian model of factor-saving technical change, and their own experience in southeast Asia, they proposed a model in which the direction of technical change in agriculture was induced by changes (or differences) in relative resource endowments and factor prices. In this model, alternative agricultural technologies are developed to facilitate the substitution of relatively abundant (hence, cheap) factors for relatively scarce (hence, expensive) factors.

Advances in mechanical technology in agriculture have been intimately associated with the industrial revolution. But the mechanization of agriculture cannot be treated as simply the adaptation of industrial methods of production to agriculture. The spatial dimension of crop production requires that the machines suitable for agricultural mechanization must be mobile -- they must move across or through materials mat are immobile (Brewster, 1950). The seasonal characteristic of agricultural production requires a series of specialized machines -- for land preparation, planting, pest and pathogen control and harvesting --designed for sequential operations, each of which is carried out for only a few days or weeks in each season. One result is that a fully mechanized agriculture is typically very capital intensive.

Advances in biological technology in crop production involve one or more of the following three elements: land and water resource development to provide a more favorable environment for plant growth; me addition of organic and inorganic sources of plant nutrition to the soil to stimulate plant growth and the use of biological and chemical means to protect plants from pests and pathogens; and selection and breeding of new biologically efficient crop varieties specifically adapted to respond to those elements in the environment that are subject to management. Advances in mechanical technology are a primary source of growth in labor productivity; advances in biological technology are a primary source of growth in land productivity. There are, of course, exceptions to this analytical distinction. For example, in Japan, horse plowing was developed as a technology to cultivate more deeply to enhance yield (Hayami and Ruttan, 1985, p. 75). In the United States, the replacement of horses by tractors released land from animal feed to food production (White, 2000; Olmstead and Rhode, 2001). At the most sophisticated level, technical change often involves complementary advances in both mechanical and biological technology. For most countries, the research resource allocation issue is the relative emphasis that should be given to advancing biological and mechanical technology.

The model of induced technical change has important implications for resource allocation in agricultural research. In labor abundant and land constrained developing countries, like China and India, research resources are most productively directed to advancing yield-enhancing biological technology. In contrast, land abundant Brazil has realized very high returns from research directed to releasing the productivity constraints on its problem soils. Discovery of the yield-enhancing effects of heavy lime application on acidic aluminum containing soils has opened its Campos Cerrado (great plains) region to extensive mechanized production of maize and soybeans.

Transition to Sustainability

Growth in total factor productivity in agriculture, arising out of technical change and improvements in efficiency, has made an exceedingly important contribution to economic growth. Within rural areas, growth of land and labor productivity has led to substantial poverty reduction. Productivity growth has also released substantial resources to the rest of the economy and contributed to reductions in the price of food in both rural and urban areas (Shane, Roe and Gopinath, 1998; Irz et al., 2001). The decline in the price of food, which in main park of the world is the single most important factor determining the buying power of wages, has been particularly important in reducing the cost of industrial development in a number of important emerging economies. These price declines have also meant that, in countries or regions that have not experienced such gains in agricultural productivity, farmers have lost competitive advantage in world markets and consumers have failed to share fully in the gains from economic growth. But what about the future?

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