Chapter

Productivity of the U.S. Agricultural Sector: The Case of Undesirable Outputs

Edited by V. Eldon Ball, Rolf Färe, Shawna Grosskopf and Richard Nehring

in New Developments in Productivity Analysis

Published by University of Chicago Press

Published in print August 2001 | ISBN: 9780226360621
Published online February 2013 | e-ISBN: 9780226360645 | DOI: http://dx.doi.org/10.7208/chicago/9780226360645.003.0013
Productivity of the U.S. Agricultural Sector: The Case of Undesirable Outputs

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This chapter aims to show how to model the joint production of desirable (marketed) and undesirable (nonmarketed, or “bad”) outputs in a way that is useful for productivity analysis; and to apply that model to data on the U.S. agricultural sector using activity analysis techniques. It begins with a discussion of how to model the joint production of desirable and undesirable outputs both conceptually and empirically. Next it describes the Malmquist productivity index and how it may be computed. Since the Malmquist productivity index is defined in terms of output distance functions, it seeks the greatest feasible expansion of all outputs, both good and bad. Since the expansion of bad outputs may be undesirable (due to regulations, for example), the chapter turns to a modified version of that index, which is referred to as the Malmquist–Luenberger productivity index. This index allows for contractions of undesirable outputs and expansions of “good,” or desirable, outputs. The methods are applied to a panel of state-level data recently made available by the U.S. Department of Agriculture's Economic Research Service. This data set includes variables that examine the effects of pesticides and fertilizer on groundwater and surface-water quality for the 1972–93 time frame. A commentary is also included at the end of the chapter.

Keywords: joint production; productivity analysis; Malmquist productivity index; Malmquist–Luenberger productivity index; pesticides; fertilizer; water quality

Chapter.  17718 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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