12.1 Technological change and agricultural productivity growth

Technological change drives agricultural productivity growth through innovations like mechanization, improved crop varieties, and precision farming. These advancements boost output per input, lower costs, and can increase farm profits, though benefits may be unevenly distributed.

Public and private R&D investments fuel agricultural innovation, while market conditions and farmer capacity influence adoption. Measuring productivity accurately requires comprehensive data on inputs and outputs, presenting challenges but also opportunities for improved tracking and policy decisions.

Technological Change in Agriculture

Drivers of Agricultural Productivity Growth

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• Technological change advances techniques, processes, and tools used in agricultural production enabling more output to be produced with the same or fewer inputs over time
• Agricultural productivity is measured as total factor productivity (TFP) capturing the ratio of total output to total inputs used in production
• Technological change is the primary driver of long-run TFP growth
• Key innovations like mechanization, improved crop varieties (hybrid seeds) and animal genetics, synthetic fertilizers and pesticides, and precision agriculture (GPS guidance systems) have dramatically increased agricultural output per unit of land and labor
• Induced innovation theory suggests technological change in agriculture is often biased towards saving the scarcest or most expensive factors of production
  • Labor in developed countries
  • Land in developing countries

Economic Benefits of Technological Change

• The rate of return to public and private investments in agricultural research and development (R&D) is high on average
• Technological change generates substantial economic benefits in the form of higher productivity growth
• The cumulative effect of innovations has been to shift the agricultural production function upward
  • Increases output per unit of input
  • Lowers average costs
  • Can raise farm profitability if output prices remain stable
• However, the distribution of benefits from technological change may be uneven
  • Favors early adopters, larger-scale producers, or downstream agribusinesses in some cases

Impacts of Agricultural Innovations

Mechanization and Precision Agriculture

• Mechanization, including the adoption of tractors and other machinery, has greatly reduced labor requirements and costs while increasing the speed and scale of field operations enabling significant productivity gains
• Precision agriculture technologies allow farmers to manage crops and inputs more efficiently based on site-specific conditions within fields
  • GPS guidance systems
  • Variable rate input application
  • Remote sensing

Advances in Plant and Animal Breeding

• Advances in plant and animal breeding have increased yields, improved resistance to pests and diseases, and enhanced product quality and uniformity
  • Hybrid seeds
  • Genetically modified crops
• The development and use of synthetic fertilizers and pesticides has boosted crop yields
  • Provides essential nutrients
  • Protects against yield losses
  • Has some negative environmental externalities

Factors Influencing Agricultural Change

Investments and Policies

• Public and private investments in agricultural R&D are critical drivers of technological change
  • Fund the development and dissemination of new technologies and practices
  • Allocation of R&D resources across different areas of agriculture (crops vs. livestock, productivity vs. sustainability) can influence the direction of technological change
• Government policies can create incentives or barriers to the development and adoption of new agricultural technologies
  • Intellectual property rights
  • Regulatory approvals
  • Subsidies or taxes

Market Conditions and Absorptive Capacity

• Market conditions provide signals to innovators and adopters about the potential returns to different technologies
  • Relative input prices
  • Consumer preferences
  • International trade
• The absorptive capacity of farmers can affect adoption rates, reflecting their ability to learn about, implement, and adapt new technologies based on:
  • Education
  • Extension services
  • Social networks
• Agroecological conditions can influence which technologies are feasible or profitable in a given location
  • Climate
  • Soil quality
  • Water availability

Measuring Agricultural Productivity

Data Requirements and Challenges

• Accurately measuring agricultural productivity requires comprehensive data on the quantities and prices of all outputs and inputs over time which can be difficult and costly to collect, especially in developing countries
  • Outputs include crop and livestock products, and non-market goods and services (environmental stewardship, rural amenities)
  • Inputs encompass land, labor, capital, and intermediate goods (energy, chemicals, purchased services), each of which may have hard to measure quality attributes
• Constructing total factor productivity (TFP) indices involves aggregating multiple outputs and inputs
  • Requires choosing appropriate weights
  • Dealing with issues like changes in quality or composition over time
• Differences in methodologies, data sources, and assumptions can lead to varying estimates of agricultural productivity growth, making comparisons across studies or countries challenging

Opportunities for Improved Measurement

• Advances in remote sensing, precision agriculture, and data analytics are creating new opportunities to collect more detailed and timely data on agricultural production processes at lower cost
  • Issues related to data ownership, privacy, and interoperability need to be addressed to fully realize these benefits
• Improving the measurement of agricultural productivity can help:
  • Inform policy decisions
  • Target R&D investments
  • Track progress towards sustainable development goals