An analysis of sources of growth in French agriculture 1960-1984

Agricultural production in France has increased considerably since the late fifties, turning France into a net exporter in world markets. This has generated a heated policy debate between France and the United States, centering around different views of the sources of growth in French agricultural production between 1960 and 1984. To shed some light on this debate, these sources of growth were analyzed.

A sectoral model of the French agricultural sector is developed. It is based on the assumption of profit maximization. Duality theory is used to derive short- and long-run output supply and input demand equations. All variables controlled by the decision-maker are endogenized. These include output supplies (cereals, other crop products, milk, other animal products), use of variable inputs (feeds, fertilizer-energy, hired labor), and optimal quantities of the quasi-fixed factors (family labor, capital).

The data used in estimation comes from published sources, except for series concerning French agricultural research expenditures, preferential credit rates, and agricultural labor. These were collected from unpublished sources specifically for the study.

In general, signs of estimated coefficients conform to theoretical expectations. Technological change is estimated to have played the major role in inducing production growth. Technology-led increases are attributed mostly to French research expenditures in the case of cereals, and, in the case of milk, both to French research expenditures and to transfers of technology. Credit policies have also played a role, being responsible for an estimated 8.6 and 10.4 percent of the growth in cereals and milk production.

These results have important policy implications. First, if rapid technological gains have brought France into a situation of comparative advantage, we should expect to see French policy-makers shift toward a freer market stance in trade negotiations. Second, because of massive technology transfers and shrinking export markets, the problem of protection of national research is likely to become a part of trade policy debates. Third, even if international negotiations succeeded at reducing price supports, such steps could be quickly outweighed by continual outward shifts of the supply curves if efforts to develop agricultural technology are pursued.