Total Factor Productivity growth accounts for all growth in U.S. agriculture according to USDA

The TFP indexes reveal the dramatic contraction of labor in the farm sector. Agricultural land, a component of capital, also fell steadily, except for a brief cessation in the 1970s, and by 2004 amounted to less than three-quarters of its 1948 value. In contrast, the sector’s use of equipment and of material inputs—energy, fertilizers, pesticides, and purchased services—increased considerably until the early 1980s. After that, materials inputs fluctuated but showed no strong growth, and equipment inputs declined. Between 1948 and 1979, the sector substituted expanded usage of equipment and agricultural chemicals for declining land and labor inputs. As a result, materials accounted for a significant share of agricultural output growth, even though growth in total factor productivity was also important. However, output continued to grow after 1979, while capital inputs declined and material inputs (including chemicals) grew very little, compared with levels in 1979. Consequently, growth in TFP accounted for all of the post-1979 expansion of output. There can be little doubt that productivity growth has been the engine of economic growth in post World War II agriculture. TFP growth sparked most of the gains in production between 1948 and 1979, with added capital and materials accounting for the remainder. After 1979, when inputs in total declined, TFP drove all of the substantial increase in aggregate agricultural production.

Source: USDA ERS – Productivity Growth Drives Expanded Agricultural Production

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Economist at Santa Clara University and Director of Friends of African Village Libraries.
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