Despite their differences in natural resources, Japan, European countries, and the United States managed to expand their agricultural output by up to 1.7 percent a year. Japan and the continental European countries achieved their rapid growth because yields (output per hectare of arable land) grew at about 1.5 percent a year, or roughly twice as fast as in the United States.
Because the direct effects of mechanization on yields are small, however, any effect of subsidies on agricultural output must be an indirect one that arises from the cost reduction made possible by machines. But when mechanization is not spontaneously driven by some form of labor scarcity, the impact on production costs is not large; the output effects of subsidies therefore cannot be large either. When mechanization is caused by subsidies, reductions in the agricultural work force can be substantial.

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Despite their differences in natural resources, Japan, European countries, and the United States managed to expand their agricultural output by up to 1.7 percent a year. Japan and the continental European countries achieved their rapid growth because yields (output per hectare of arable land) grew at about 1.5 percent a year, or roughly twice as fast as in the United States.
Because the direct effects of mechanization on yields are small, however, any effect of subsidies on agricultural output must be an indirect one that arises from the cost reduction made possible by machines. But when mechanization is not spontaneously driven by some form of labor scarcity, the impact on production costs is not large; the output effects of subsidies therefore cannot be large either. When mechanization is caused by subsidies, reductions in the agricultural work force can be substantial.

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