Discussions on the future competitiveness of European agriculture often return to the role of capital. Investment in modern equipment, digital technologies, and precision farming systems is widely regarded as essential to sustain productivity growth and to meet new environmental and market challenges. While the Draghi report on EU competitiveness did not directly address the agriculture and food sector, questions are increasingly asked about whether the current pace and composition of investment are adequate, and whether capital is being used efficiently within the sector. These questions are particularly relevant as structural change continues, with a declining labour force and a growing reliance on technological and digital solutions.
The relationship between capital, labour and output in agriculture provides a useful framework for examining these issues. In accounting terms, labour productivity—measured as output per worker—depends both on the amount of capital each worker uses (capital per worker) and on how efficiently that capital is employed (output per unit of capital).… Read the rest