Knowledge, prices and factor demand : Fertilizers in Argentine Agriculture

The objective of this paper is to analyze the relative importance of knowledge inputs(or “technical change”) and input prices in explaining factor demand in Argentine agriculture.Motivation for the paper is the fifteen-fold increase in fertilizer demand observed in Argentina inthe 1990-2019 period. Understanding the factors affecting fertilizer use is important, as this inputaccounts for a significant portion of output in countries with a highly productive agricultural sector,such as the U.S. and others. In addition, increased concern for the sustainability of agriculturalsystems requires understanding of the economics of fertilizer use, as fertilizers can both contributeto sustainable production (via increased production not only of marketable products, but also drymatter to be incorporated to the soil), but at the same time raise issues, in particular, related togroundwater contamination and energy (in the form of fertilizer) used in the agricultural sector.Results show that in the 1990 – 2019 period increase in fertilizer demand was a result not only ofa fall in the fertilizer/crop price ratio, but also on increased marginal productivity of the fertilizerinput. It is suggested that this is a result of the increased importance of “knowledge inputs” in theproduction process