Determinants of total factor productivity in the Australian grains industry

Abstract

Examination of the determinants of total factor productivity (TFP) in the Australian grains industry is undertaken using panel data from ABARE’s Australian Agricultural and Grazing Industries Survey. The analyses are conducted at the individual farm level, spanning the period from 1988-89 to 2003-04. Using panel and differencing estimations, the empirical results indicate that work experience, formal education, farm size, land use intensity, crop specialisation, moisture availability and moisture variability are important factors influencing TFP performance. Once unobserved heterogeneity is accounted for, management and farming practices become significant explanatory variables for TFP and the effect of moisture availability becomes more significant. Various sensitivity analyses confirm the robustness of these findings.

Key words: Productivity, agriculture
JEL classification: Q1, D24

Corresponding author: Hiau Joo Kee
Email: hjkee@abare.gov.au
Address: 7b London Circuit, Canberra, ACT Australia.
Phone: +61 2 6272 2218

1 This project was funded by the Grains Research and Development Corporation (GRDC). The authors thank Zoltan Lukacs for reviewing and commenting on this work. The authors would also like to acknowledge invaluable assistance from Phil Kokic in facilitating access to ABARE farm survey data. The authors recognise contributions from other ABARE staff, especially Jammie Penm, Peter Gooday, Tim Goesch, Katarina Nossal, Stephen Hooper and Lisa Elliston in providing constructive comments. The authors also thank the participants at the Australian Conference of Economists, Adelaide on 28 to 30 September 2009 for their feedback.