FIGURE 5.2 Variability of total US farm output, 1929-2000. Variability is measured as the deviation of real farm output from its quadratic trend, where output is measured in billions of dollars in 1996 prices. These data include all farm output including cereals, fruits and vegetables, and livestock. (Data from Bureau of Economic Analysis.)

the output of that sector. Surprisingly, however, the vulnerability of the overall economy to agricultural shocks has declined over the last seven decades. The overall vulnerability is here measured as the ratio of the deviation from trend of real gross output shown in Figure 5.2 divided by trend real gross domestic product (Figure 5.3). The maximum deviation due to agriculture over the entire period was –0.75 percent of total output in 1934, while the maximum deviation in the last decade was only 0.14 percent in 1992. The declining sensitivity of overall output to agricultural shocks lies primarily in the declining share of output originating in agriculture. Agricultural output was 5 percent of total gross domestic product in the early 1930s but averaged 1.2 percent of total output in the late 1990s, so weather shocks to farming have a relatively smaller overall impact today than in earlier years.

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