LAUSR

Efficient management of natural resources and environmental assets requires adequate assessment of natural capital on farms. Conceptual frameworks and practical measurement techniques to assess the state of natural capital assets and ecosystem services on farms are not readily available. In this paper, we propose a natural capital adjusted productivity and efficiency technique that can be used in effectively measuring the dynamics of natural capital on farms. This on-farm natural capital indicator is constructed based on the directional distance functions approach. As an empirical application, this newly devised indicator is applied to determine how soil natural capital in farm production systems changes over time. Findings from this study will aid decision making to support maintaining higher farm productivity growth in agriculture and achieving environmental sustainability.