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Abstract
Analysis of agricultural production generally ignores the undesirable outputs (such as soil
erosion) that are jointly produced with desirable, marketable outputs. In this paper we
present preliminary TFP results incorporating national level data for off-site damage costs
for soil erosion for broadacre agriculture between 1953 and 1994. Following the approach
introduced by Repetto et al. (1996) our revised TFP estimates provide interesting results.
When we assume that damage costs per ton of soil erosion are constant our TFP estimates
are higher than estimates omitting the undesirable output. This result can be explained by
the fact that the rate of soil erosion grew slower than output increased or the rate of soil
erosion declined and agricultural output remained constant. Defining weak sustainability
(i.e., allowing substitution between natural and human capital) as non-declining TFP our
results indicate that Australian broadacre agriculture is sustainable. Note our results are
only preliminary because there are other externalities that we do not include in the analysis
and the existing soil erosion damage cost data is very weak.