On the potential for crop yield increases to spare land: the role of rebound effects.

Abstract

This essay discusses the economic mechanisms determining when yield growth spares land and when it drives expansion. The source of growth matters: technical change raises output with a fixed set of inputs, lowering production costs, whereas intensification requires more inputs and, unless those inputs are themselves more productive, raises costs. Because lower costs translate into lower prices, the outcome turns on how consumption responds. Where demand is inelastic, so that consumption changes less than proportionally to price, productivity gains lower farm profits and spare land, although rebound effects mean sparing is rarely complete. Where demand is elastic, gains raise profitability and cultivated area expands if land is available (backfire or Jevons effect). Farmers in agricultural frontiers supplying large domestic and international markets face elastic demand, making such regions prone to backfire. Globally, however, demand for agricultural output has been historically inelastic. This fact, combined with vigorous growth in global agricultural productivity, has resulted in net global land sparing. A slowdown in total factor productivity growth over the last decade and a half threatens these gains. Sustaining this outcome requires renewed investment in agricultural research and development, and policies that constrain frontier expansion.