Economic assessment of technological change and land degradation in agriculture: application to the Sri Lanka tea sector

Abstract

Productivity change is an important potential aspect of technological change, so that productivity measurement plays a crucial role in assessing the effects of technological change in agriculture. This study contributes to an understanding of total factor productivity change by assessing the extent and nature of such change for the Sri Lankan tea industry over the period 1960–1995. The total factor productivity measures are then used to define a conceptually sound measure of the production cost of land degradation, providing insight into the scarcity of soil in the tea sector. Based on the theoretical relationship of the impact of technological progress and land degradation on tea production, a regression model is fitted to decompose the total factor productivity variable. Technological change, when the study period as a whole is considered, produced cost savings, rather than output increases. Tea output levels have been maintained, despite significant decreases in total inputs. On the basis of available data and the chosen model, it could be concluded that the positive impact of technological progress has outweighed the negative effect of land degradation in Sri Lanka's tea sector, over the study period. The study highlights the systems aspect of analysis into the productivity and land degradation issues in agriculture.