Incorporating environmental impacts into productivity analysis: the case for nitrogen leaching in the Australian dairy industry

This paper examines how the adoption of a system's perspective to the use of both marketed and public resources can be incorporated into an analysis of productivity measurement.  A biophysical model is used to measure the environmental inputs which are combined with conventional marketed inputs to develop a Malmquist Productivity Index to determine social productivity growth over the perios under study.  The analysis is applied to data collected from selected farms in south west Victoria and includes a measure of leaching and run-off as a proxy measure of the impact the application of fertilizers has on ground and surface water.  Although the sample is small, the results show measured productivity growth differs when environmental factors are considered.