Measuring Productivity Change in U.S. Agriculture

To understand the sources of change in productivity, that appropriate public policy and programs can be developed to increase productivity growth, a reliable and updated measure is needed. The term “productivity” discussed here refers to total factor productivity, or the ratio of value of total agricultural output to that of all inputs used in agricultural production. The first comprehensive work on the measurement of productivity change in U.S. agriculture was done by Loomis and Barton in 1961. Since then, this index has been updated annually as an offical USDA agricultural productivity index. The weakness of using index numbers lies in the arithmetic formula used. It implies a specific functional form of the production function that may not accurately describe the data. Thus, a need arises to consider an alternative estimate of productivity.