Productivity across Industries and Countries - Assignment Example

Name Student Id Lecturer’s Name Date Question 1 This shortage of labour will mean that lamb producers will have to reduce on their production. This will create a crisis in the lamb production and farmers will start offering higher prices that those of the mining sector so as to attract labour so that they can continue with their production and to cater for their market (Case, & Fair, 1999). The wages of the lamb sector are low and are shown by P1 and the quantity of labour the sector attracts q2 which is under demand curve D2and supply curve S2. At D1 the wages of the two sectors are equal at P1 but mining is still attracting high number of workers. This changes when the mining industry increase its wages to P3 and this increase the number of labour supply to q1 under S2 and D3. Question 1 (b) The margin created by the labour shortage will have a very high impact in the entire lamb production (Frank, 2008). There will be few farmers with lamb and they will sell them a t a higher price because the demand will be high and the supply will be low. The buyers will have no option apart from buying them. These expensive prices by farmers will be moved to the retailers and therefore, the margin will highly impact the retail prices (McConnell, & Brue, 2008). The reason behind this is that those buying from the farmers will have to earn their normal profits. Therefore, they will increase their prices so as to cater for the increased farm prices (Frank, 2008). Question 2 In a perfectly competitive market the suppliers are price takers and therefore, they have little choice on the price to sell their products. Therefore, the Australian eggs market suppliers have their prices determined by the level of the total supply in the market. This means that by artificially reducing the supply in the market the association aims at the same price for the reduced level of supply. The reason behind this is that there are many buyers and sellers in the industry and therefore, their individual efforts cannot affect the market. The individual firms are price takers but the industry as a whole is the price maker. the Australian Egg Corporation Ltd (AECL) is worried about the increase of the eggs supply because it will push the prices to P1 to P. This will mean that quantity supplied will increase from Q to Q1. In a perfectly competitive market P=MC and the firm can only increase its revenue by increasing its supply in the market. This method can be successful if all the farmers work to reduce their production and supply in the market. This might create shortage in the industry which will tempt individual firms to increase their supply which will end up flooding the market. Therefore, the AECL cannot be very sure that their members will follow their instructions because they are independent. The reason behind this is that individual firms will work to ensure that they maximize profits by increasing their supply and sales (Frank, 2008). Question 3 Introduction The purpose of the paper by Mullen and Keogh (2013) is to analyse and review trends that are the key drivers that increase productivity. The paper also aims at suggesting the level of productivity growth that should be maintained so as to maintain competitiveness in the Australian agriculture sector in the Australian economy and the other agricultural sectors of other countries. The writers also have an aim of finding support so that this level of productivity can be achieved before 2030 (Sheng, Gray, Mullen & Davidson, 2011). The paper has also worked to identify the reasons behind the slow growth of agricultural sector in the country. The paper has identified stagnation in government investment in agricultural research and development (R & D). The paper also aims at identifying the growth rates that can be achieved in the agricultural sector in the coming years. This is through comparison of the already achieved rates in the short run and the ones which can be achieved in the long run. The paper also works to ensure that there are suggested solutions that will help increase level of productivity and competitiveness in the agricultural industry (Solow, 1993). The paper suggests that TPF of 2 to 2.5 % should be maintained so as to ensure growth in the agriculture sector. The paper also identifies investment in research and development as one of the problems that needs to be solved by ensuring g this investment is increased to above 3% of the agriculture GVP. The paper is also aimed at identifying reason leading to growth in output of the Australian agriculture sector. The paper is aimed at explaining and defining the concept of productivity together with its components (Solow, 1993). The Body The paper identifies the factors that influence the competitiveness of the Australian agricultural sector which include productivity growth. Productivity growth is said to have highly contributed to growth of output in the Australian agriculture sector (ODonnell, 2010). This is highly evident by the absence of productivity growth for the past six years which led to productivity of about 12 billion Australian dollars instead of 40 billion Australian dollars. The rate of productivity growth has been about 2% since the 1953 this can be said to have contributed to over 70% of agriculture production which was reported in 2010. This trend has been threatened by continued growth in other sectors such as the mining. This has highly threatened the future competitiveness of the agriculture sector in Australia. The reason behind this is that there will be diversion from agriculture to other sectors. There is also reduction in research and development in the agricultural sector (ODonnell & Griffiths, 2006). Therefore, according to Mullen and Keogh research and development in agriculture is very important so as to maintain competitiveness in the sector. This will help eliminate problems such as climate change so as to compete with other agriculture exporters. Research and development is very important for productivity growth to be achieved in Australia. This will help the sector to realise its full potential and to have a share of its resources in the economy without people moving to other sectors. It is evident that farmers will always move to other profitable sectors (Mullen et al., 2012). Productivity is taken to be one of the key determinants of profitability. This is highly driven by trends of terms of trade in the agricultural sector (Mullen, 2011). This are the returns the farmers get for their outputs as compared to the input they had used. Productivity growth is said to be beneficial to farmers if it increases their profitability. Therefore, every farmer aims at achieving productivity growth that will increase their earnings. This means they will only invest in inputs that will increase their productivity regardless of productivity growth (Gopinath, Arnade, Shane, & Roe, 1997). TPF can be used to determine whether the industry is more or less competitive by comparing with the terms of trade. According to reports terms of trade in the agriculture sector has been declining in the past years making farmers shift to other sectors which are profitable. The writers have provided enough evidence on the reduction of terms of trade where the terms of trade declined from 355 to 100 which is about 2.2% per year. This was reported during the period of 1953 to 2009. This rate of declining was considered to be high as compared to the rate of productivity in the broad care agriculture sector. This registered a 2.6% per year for the same period. This has highly reduced the profitability in broad care agriculture but this is being covered by productivity in other sectors of the agriculture. Therefore, it is important to consider terms of trade while investing in a certain sector. The article also identifies investment in Research and Development (R&D) as one of the most crucial inputs in agriculture. There has been continued decline in public investment in research and development in the recent years. This slowdown in investment in research and development is very high in northern and western region as compared to southern region (ODonnell & Griffiths, 2006). The article also identifies the use of technical change and technical efficiency as measures for effect of research and development. The gains from technical change are certainly offset by decline in the technical efficiency. The two measures state that there is will overall improvement in the whole sector but average farms do not attain so much improvement as compared to the best farms. The technical efficiency rate is about 0.8% which means that there is so much need to improve this rate so as to achieve better output from farmers. This will improve the production frontier (Bernard & Jones, 1996). The contribution of technical change and efficiency has policy implications because it will helps in increasing productivity growth. This means that policy makers need to allocate more funds to research and development. The reason behind this is that it will shift the production frontier which is opposed to moving many farmers close to the frontier. TPF growth has highly been attributed to technical change because technical efficiency has been on the decline for past decade. This makes it important to solve the issues will TFP growth and competitiveness in the agriculture sector (ODonnell & Griffiths, 2006). Conclusion The paper has weaknesses because it identifies many solutions and it does not provide ways on how to achieve them. The paper identifies research and development as one of the ways ton increase productivity growth but it only identifies the source of funding. It leaves out the types of research and development that should be invested in to help in achieving the desirable productivity growth. There are so many issues that can arise from research and development and this can lead even to confusion to the policy makers and implementers. The paper also dwells on research and development as one of the main contributors of productivity growth in the agricultural sector (ODonnell & Griffiths, 2006). The climate problems are also highly affecting the sector and making farmers to move to other sectors which are considered to be more productive. There are methods which have been used to eliminate the problem of climate change in the agricultural sector through the use of greenhouse technology. The writers also have not increased so much content about the topic because they have relied so much on the literature of other writers and the data provided by the government departments. The literature provided by the writers does not identify solutions to help small scale farmers but dwells on solving the problems of best farmers. This means that the solutions are only for large scale production. Therefore, there is need for the writers to cater for all the farmers so as to ensure that the whole economy has improved. Ways to increase farm level productivity There are ways to increase farm level productivity which one can undertake. This can be done by improving the management of agricultural biodiversity resources which include seeds and other farm inputs. This will help achieve higher yields as well as promoting sustainability of the best farming systems so as to attain market oriented agriculture. Therefore, there is need to have biological efficiency established in the production system. This will be by the use of technics such as conservation agriculture (Solow, 1993). There is also need to improve distribution of the agricultural inputs. Distribution of agricultural resources has highly contributed to low productivity in the county. This means that the resources are not distributed to all farmers at the same time. This leads to low production because even some farmers do not access the inputs. Therefore, the country needs to eliminate unequal and unfair distribution of resources. Distribution also means the accessibility through offering affordable prices (Solow, 1993). There is also need for crop improvement so as to ensure the farmers grow get access to high quality seeds and products. This will increase productivity because high quality seeds come with great responsibility of ensuring the inputs march the output. This is possible through the use of high quality technology to improve the current crops. This will also help in introduction of climate resistant crops which will grow at all times without being affected by climate changes (Solow, 1993). References Bernard, A,B. and Jones, C, I. (1996). Productivity across industries and countries: Time, Review of Economics & Statistics, vol. 78, no. 1, pp. 135–46. Case, K & Fair, R, (1999). Principles of Economics (5th ed.). London: Prentice-Hall. Frank, R, (2008). Microeconomics and Behavior (7th ed.). London: McGraw-Hill. Gopinath, M, Arnade, C, Shane, M & Roe, T (1997). Agricultural Competitiveness: the case of the United States and major EU countries, Agricultural Economics, vol. 16, no. 2, pp. 88– 99. McConnell, C, & Brue, S. (2008). Economics: Principles, Problems, and Policies (11th ed.). New York: McGraw-Hill. Mullen et al., (2012). Assessing the opportunities for achieving future productivity growth in Australian agriculture. Australian Farm Institute, Sydney. Mullen, J,D. (2011). Public investment in agricultural R&D in Australia remains a sensible policy option, Australian Farm Business Management Journal, vol. 8, no 2, pp. 1-12. ODonnell, C,J, Griffiths, W,E. (2006). Estimating state-contingent production frontiers, American Journal of Agricultural Economics, vol. 88, no. 1, pp. 249-266. ODonnell, C,J. (2010). Measuring and decomposing agricultural productivity and profitability change, Australian Journal of Agricultural and Resource Economics, vol. 54, no. 4, pp. 527–560. Sheng, Y, Gray, EM, Mullen, JD & Davidson, A. (2011). Public investment in agricultural R&D and extension: an analysis of the static and dynamic effects on Australian, broad care productivity, ABARES research report 11.7, Canberra. Solow, R. (1993). An almost practical step toward sustainability: resource policy, Resources for the Future, pp. 162–72. Read More