Wednesday, 4 June 2014

New EHES Working paper:

Just Add Milk: A Productivity Analysis of the Revolutionary Changes in Nineteenth Century Danish Dairying

"Cows on Saltholm" (Theodor Philippsen, 1892), Danish National Gallery
What is it that makes agricultural producers more productive? In this paper, Markus Lampe and Paul Sharp examine the Danish agricultural revolution, a period when first large and then small farmers caught up quickly with and extended the productivity frontier in milk production – most of it being exported in the form of butter and, as a byproduct, bacon, to the growing industrial cities of Britain. Soon, Danish dairying led the world in terms of productivity. Uniquely in a world perspective, high quality micro-level data exist documenting this episode, from surveys of manor/estate farms conducted by leading dairy economists for the Danish periodical Tidsskrift for Land√łkonomi (Danish Journal of Agricultural Economics) over a number of years from 1880.

These farm-level data allow the use of the tool of modern agricultural economists, stochastic frontier analysis, to estimate production functions for milk, using mainly cows and feed as inputs, and to estimate simultaneously the extension of the production possibility frontier (about 0.4 percent per year) and the increase in average efficiency, that is, how close the typical farm is to the frontier, or in other words, whether it uses its inputs to arrive at the maximum possible output. Both together allow for a bottom-up calculation of average total factor productivity (TFP) growth of about 1.5 percent per year between 1880 and 1900, with the possibility of distinguishing the contributions of technical progress (a shift in the frontier), such as the introduction of the new Danish Red breed, and more efficient uses of factors of production in modern dairying, as exemplified by concentrate feeding, year-round production through calving in autumn, and the modernity of the farm as proxied by the use of automatic cream separators. 

The working paper is EHES number 55 and can be found here

Markus Lampe is associate professor
at 
Carlos III University of Madrid
Paul Sharp is associate professor at
University
of Southern Denmark


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