Inputs, Outputs, and Total Factor Productivity in the US Farm Sector: A New State-Level Analysis

• Activity Number: 96 - Advances in the Measurement of Inputs, Output, and Productivity in the US Federal Statistical System
• Type: Topic Contributed
• Date/Time: Monday, August 8, 2022 : 8:30 AM to 10:20 AM
• Sponsor: Quality and Productivity Section
• Author(s): Sun Ling Wang* and Eldon Ball and Richard Nehring
• Companies: USDA-Economic Research Service and University of Maryland and USDA-Economic Research Service
• Keywords: Total factor productivity (TFP); multilateral outputs, inputs, TFP; U.S. agricultural productivity ; U.S. state productivity accounts; U.S. farm sector productivity ; quality-adjusted labor estimates

Abstract

For decades, the U.S. Department of Agriculture (USDA) has monitored the farm sector’s productivity performance. Having incorporated recommendations made by an AAEA task force (USDA, 1980) and by a second, more recent panel (Shumway et al., 2017), the USDA’s Economic Research Service bases its official productivity statistics on a sophisticated system of production accounts. While the national data series has been updated through more recent years, State-level statistics are suspended due to the discontinuing of critical labor data. This paper revisits the state productivity measurement issues by introducing a new labor data source to develop a quality-adjusted state labor panel (1960-2015). We further construct multilateral inputs, outputs, and total factor productivity indices for 48 contiguous states, spanning the 1960-2015 period. Analysis shows that total factor productivity growth is the primary driver of farm output growth. However, productivity growth rates vary considerably across states, ranging from 0.1 percent to 2.57 percent per year between 1960 and 2015. Furthermore, the average annual productivity growth rate has slowed for most States in the last two decades.