Abstract
This study examines factor substitution and energy intensity in the U.S. agricultural sector. Not only does this study focus on the substitution possibilities between energy and non-energy factors, but it also attempts to identify the factors that determine energy intensity. For the empirical analysis, a system of share equations for capital, energy and labor is estimated to calculate the price elasticities of factor demand. The findings reveal that energy demand is more elastic than the demand for capital and labor, and factor substitution possibilities exist across farm production regions. Moreover, the growth rate of energy intensity is decomposed into various driving forces, such as changes in budget, factor substitution, output and technology. The findings show that the budget and output effects are the major driving forces behind the reduced energy intensity, while there are few factor substitutions and technological improvements to reduce energy intensity in the U.S. agricultural sector.
Highlights
In the United States, farm production has increased due to the growth of productivity over the last few decades
While the U.S agricultural sector has increased the amount for capital and intermediate factors, energy intensity has dramatically decreased over the last few decades
The reduced energy intensity is attributable to increases in energy prices, advances in energy efficiency or changes in output composition, but the literature has paid little attention to identifying the determinants that contribute to the reduction in energy intensity
Summary
In the United States, farm production has increased due to the growth of productivity over the last few decades. According to the Economic Research Service of the United States Department of Agriculture (USDA-ERS), the annual growth rate of the total factor productivity (TFP) was more than 1.4% between. 1948 and 2011, which contributed to substantial increases in agricultural outputs (Figure 1). Between 1948 and 2011, the U.S. agricultural sector decreased the amount of labor by 78% and land by 26%, but it increased the amount of capital and intermediate factors (e.g., energy, chemicals, purchased services, seed and feedstock) by. The contribution of capital and intermediate factors to the agricultural output growth has been offset by the negative impact of labor and land on the growth
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