John Mullen

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Rural IndustriesMaintaining Productivity in
aChanging Climate

• John Mullen
• Research Leader, Economics Coordination and
  Evaluation
• Principal Research Scientist, NSW DPI
• Adjunct Professor, CSU and University of Sydney
• AARES 2008 Pre-conference workshop Feb. 5
• Climate Change Issues and Challenges for the
  Economy and Society

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Industry Commission

• productivity growth has accounted for about
  two-thirds of the increase in Australians
  average real incomes over the past three decades
  and about half the increase in Australias
  output

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Blinder and Baumol

• Nothing contributes more (than productivity) to
  reduction in poverty, to increases in leisure,
  and to the countrys ability to finance
  education, public health, environment and the
  arts.

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Parhams estimates of productivity growth in
Australian agriculture

• Agric Aust. Agric/Aust
• 1975 82 1.6 1.1 1.4
• 1982 -85 1.1 0.8 1.4
• 1985 89 1.4 0.4 3.5
• 1989 94 2.6 0.7 3.7
• 1994 99 4.3 1.8 2.4
• 2000 05 2.7 0.9 3.0

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Comparative Advantage Depends on

• Relative technical change within and between
  economies
• Relative demand shifts
• Relative climate change within and between
  economies

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Todays Objectives

• Review Trends in broadacre agricultural
  productivity in Australia
• Speculate about the impact of climate change
• Review contribution of RD to productivity growth
  
• Review RD in context of climate change

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Total Factor Productivity
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Broadacre TFP v Terms of Trade
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TFP in Australian Broadacre Agriculture
Watershed year
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Annual TFP Growth Rates for Broadacre Agriculture
in Australia
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ABARE Estimates of Growth
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Impact of Climate Change
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Impact of 4.2 climate change in 2030
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Annual Cost of Climate Change
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Agricultural Research Providers
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Conclusions re Returns to RD

• Returns to Research in Aust. 15 40
• No evidence of a decline in the returns from
  research.
• Some support for the Underinvestment Hypothesis
• Consistent with Alston et als meta analysis of
  292 studies
• Maintain investment in agricultural RD

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RD and Climate Change

• Much Ag. RD is already about adaptation to
  environment
• RD has been spectacularly successful here
• Climate change doesnt diminish research
  opportunities
• Does climate change erode the value of
  information created by past research?
• Long lived basic v short lived applied RD
• Applied RD is often short lived and is
  responsive to environmental variability
• What do State Continent/Real Options Approaches
  Offer?

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Conclusions

• Measured PG reflects both climate variability and
  CC
• PG remains strong with climate change
• CC lowers the level of productivity
• CC is one factor affecting the rate of PG
• PG exceeds present rates of CC
• RD is a major cause of PG
• Returns to RD remain strong
• Most ag RD is already about adaptation to
  climate
• RD is unlikely to be the sole response
• If the rate of CC increases all bets are off

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References

• Mullen, J.D., 2007, Productivity growth and the
  returns from public investment in RD in
  Australian broadacre agriculture, Australian
  Journal of Agricultural and Resource Economics
  51(4)359-384.
• Mullen, J. D. and Crean J., 2007, Productivity
  Growth In Australian Agriculture Trends,
  Sources, Performance, Research Report, Australian
  Farm Institute, Surry Hills, Australia.