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Use of the single factoral terms of trade to analyse agricultural production *
Author(s) -
Fleming Euan
Publication year - 2007
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/j.1467-8489.2007.00366.x
Subject(s) - total factor productivity , barter , economics , production (economics) , agriculture , productivity , commercial policy , agricultural productivity , terms of trade , international trade , microeconomics , macroeconomics , ecology , biology
The aim in this note is to reintroduce the single factoral terms of trade into the policy arena. This economic concept has scarcely been used by analysts or policy makers over the past three decades. It is defined and compared favourably with other terms of trade concepts in terms of their usefulness to agricultural policy makers in Australia. A distinction is made between the single factoral terms of trade from the viewpoint of the farm business and from the viewpoint of the farm household, but only slightly different indices are specified in each case because of the very high positive correlation between farm prices paid and consumer prices. Developing industry‐level indices appears to be a more attractive way to proceed given the substantially different rates of growth in total factor productivity (TFP) between agricultural industries. Despite its usefulness, challenges lie ahead in accurately estimating each of the two components of the single factoral terms of trade, the net barter terms of trade and TFP, and the relations between these two components.