Agricultural Support Policies, Productivity and Competitiveness

Government policies in support of agriculture, notably subsidies and border protection through import restriction, have effects on prices, quantities, and welfare indicators that have been widely studied. Effects on productivity have been less thoroughly analyzed. This paper considers (1) issues in the measurement of productivity under constraints imposed by policies, in the US case for example, whether land idled under commodity programs should be included in the input set, (2) the effects of agricultural policies on productivity over the longer term, and (3) the appropriate measure of the concept of competitiveness and how competitiveness is influenced by commodity support policies. With respect to productivity measurement, while commodity support policies create interesting complications, their effects on the rate of measured productivity growth is likely to be small, even though in a broader sense the deadweight losses of policies impose a burden that should not be neglected. Possibly substantively more important are longer-term mechanisms through which support policies influente investment and adoption of new technology.