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Abstract
There is considerable policy interest in quantifying the impact that land degradation has
on agricultural production yet we have little evidence of the extent of this aggregate
impact. In this paper it is shown that estimates of total factor productivity (TFP) can
be used to define a conceptually sound measure of the production cost of land
degradation. The rate of growth in TFP in agriculture represents the outcome of the
combined impacts of technological progress, improvements in both allocative and
technical efl1ciency and land degradation on the agricultural production system. Data
for the Australian broad acre agricultural sector are used to investigate the feasibility of
decomposing TFP data to derive an estimate of the production cost of land
degradation. The approach fails to identifY any significant impact from land
degradation on aggregate production.