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The motivation to this question is the Biblical commandment of Sabbatical year, in which the land should be allowed to rest and should not be cultivated. I am trying to estimate how much would it cost to actually implement this commandment in an industrial economy.

For concreteness, I use data about the Israeli agricultural product; my main problem is the interpretation of the data, which is probably applicable in other countries.

Here are the relevant data for 2013 (rounded and in billions of ILS):

  • INPUT (excluding compensation for employee jobs) = 19.7. Of these: Input (purchased and from intermediate produce) = 17.5; depreciation = 2.2.
  • OUTPUT: 30.0. Of these: crops = 18.1, animals = 11.9 (note that only land-cultivation is prohibited, while growing animals is permitted).
  • DOMESTIC PRODUCT: Gross = 12.5, Net = 10.3 (the difference between them is the depreciation.)
  • INSURANCE COMPENSATION AND OTHER RECEIPTS: 1.0.
  • INCOME ORIGINATING IN AGRICULTURE: 11.1. Of these: Compensation for employee jobs: 5.3 (Q1: where do the other 5.8 go to?)

My assumptions are as follows:

  • The consumers should still eat fruits and vegetables. So, instead of growing fresh fruits and vegetables, some of these will be imported, while others will be preserved from the previous year (e.g. dried fruits and other products with long shelf life).
  • The farmers should be compensated on giving up the right to till their land, by giving them the same gross income that they have in a usual year.
  • However, other workers that deal with agricultural produce, such as: truck drivers, traders, workers in fruit markets, etc., should not be compensated because they can still work with imported produce (Q2: do the figures in the table include the income of these workers? Or do they belong to a different branch of economics?)

I did several calculations and got different results:

  1. When there is no land-tilling, there is no depreciation and no insurance reception. Hence, only the 10.3 net domestic product is relevant, and from this we should extract the 1.0 insurance, for a total of 9.3. This should be multiplied by 60%, which is the relevant part of "crops" (since the other 40% are "animals" which can be grown as usual). We get: 5.6.

  2. take only the compensation for employee jobs (5.3), since only employees should be compensated (should the insurance receptions be subtracted?). Again multiply by 60% and get 3.2.

  3. in a different source, I found the fact that the total number of crop farmers is only about 7000. Assuming a gross annual income of 240,000, which a top decile income, I got to only 1.7 (billion). AFAIK, most farmers make less than that, so the actual figure should be even lower.

Since the numbers in each calculation are quite different, I am interested to know what causes the difference, and which calculation should be used?

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The approach appears to be static. An intertemporal approach would recognize that part of the period's forgone production would have been used for investment, augmenting the capital base. So we also lose future consumption. But let's skip that.

In order to categorize what the country will lose (and who is going to lose it) I decompose output into certain categories and comment on each one

Output =
+ Imported materials (we don't care what happens to them)
+ Services offered from abroad (we don't care what happens to them)
+ Locally produced materials in other sectors (will there be demand for their products from other sectors of the economy? Will they be able to export them? -possibly lost income here)
+ Services offered by locals (How much of them will be used to manage the compensating imports? -possibly lost income here)
+ Rents of land owners who do not engage in farming (lost income)
+ Wages of people working the land, i.e. "Direct Labor" (lost income)
+ Wages of other personnel in the sector (will they be needed to manage imports? -possibly lost income here)
+ Depreciation (equipment will erode by the simple passage of time, but land may even appreciate in terms of productivity-after all the biblical commandment has clear practical motives. So on the balance?)
+ Profits of farmers/entrepreneurs (lost income)

A basic conclusion from the above, is that by stopping production in one sector, we may also lose some production in other sectors.

...and think also about taxes.

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  • $\begingroup$ How is it possible to estimate, say, "Locally produced materials in other sectors"? $\endgroup$ – Erel Segal-Halevi Jun 12 '15 at 2:02
  • $\begingroup$ @ErelSegal-Halevi Sometimes such estimates are available, i.e. how much imports a specific sector uses and how much domestic ones. Look for studies of input-output models. If they are not available, then one could attempt an estimation, if he knew the decomposition of costs of the sector of interest. For example, what percentage of costs is fertilizers? And then, are they locally produced or imported? I understand that the decomposition I provided makes the issue much more complex, but is also helps understand and maybe assess the degree of approximation error. $\endgroup$ – Alecos Papadopoulos Jun 12 '15 at 2:14

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