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.


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