Resource reallocation and productivity growth in the Australian dairy industry: implications of deregulation

This paper uses farm-level data to examine resource reallocation in the Australian dairy industry between 1979 and 2013, and assesses the contribution of this process to industry-level productivity growth before and after deregulation reforms were introduced in 2000. We show that deregulation facilitated the reallocation of resources from less efficient farms to more efficient ones, helping to offset the effects of a slowdown in within-farm technological progress on overall productivity growth. Moreover, resource reallocation following the reform mainly involved the movement of resources between farms that use different production systems in different regions, and which therefore have inherently different productivity performance. Further gains in aggregate productivity are likely to be derived mainly from movements of resources among farms that use similar production systems.