Fostering Productivity and Competitiveness in Agriculture

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This report reviews economic concepts of innovation, research and development (R&D), productivity and competitiveness, and their linkages. It then discusses evidence on developments in productivity and competitiveness in the agricultural and food processing sectors and on the relationship between agricultural productivity and farm size, factor intensity, farm specialisation, human capital, consumer demand, the natural environment, investments in general infrastructures and R&D, regulations, and agricultural policies. It describes developments in public and private investments in agricultural R&D and outlines their positive impact on productivity growth. Finally, it suggests an “innovation systems” approach would help understand better how innovation translates into productivity growth.

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The growing global demand for food, feed and bio-fuel is well established, with population growth, and even more importantly income growth, increasing the quantity and changing the composition of agricultural commodity demand. Increasing output by bringing more land into production and using more water is technically feasible, but there are competing uses for these finite resources; water use is particularly constrained, with some forecasts suggesting that more food will need to be produced in the future with significantly less water than used today. And of course the impacts of climate change, while highly uncertain, likely imply important changes in water availability and perhaps even shifts in production zones.

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