Price-induced technical progress in 80 years of US agriculture |
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Authors: | Quirino Paris |
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Institution: | (1) Department of Agricultural and Resource Economics, University of California, Davis, Davis, CA 95616, USA |
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Abstract: | This paper presents a theory of technical progress that interprets the price-induced conjecture of Hicks. It provides also
an exhaustive set of comparative statics conditions that constitute the scaffolding for an empirical test of the theory. A
crucial assumption is that entrepreneurs make decisions about techniques on the basis of expected information about prices
and quantities. Another assumption is that these decisions are made in order to fulfill a profitability objective. The novelty
of our approach is that expected relative prices enter the production function as shifter of the technology frontier. The
consequence of this assumption is an expansion of the traditional Shephard lemma that is useful for identifying the portion
of input quantities that has been determined by the conjecture of price-induced technical progress (PITP). The theory is applied
to a sample of 80 years of US agriculture. Three versions of the general model are presented. The first version deals only
with expected relative prices. The empirical results do not reject the PITP hypothesis. The second and third versions introduce
lagged expected relative prices, lagged R&D expenditures and lagged extension expenditures as explanatory variables of the
portion of the input quantities that may be attributable to technical progress.
I acknowledge invaluable discussions on this subject held over several years with Michael R. Caputo. I also acknowledge the
use of the theory and its justifications that were presented in previous papers by Paris and Caputo (2001) and by Caputo and Paris (2005). All the errors are mine. I dedicate this paper to my wife, Carlene, who died of a rare cancer on May 5, 2001. |
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Keywords: | Price-induced technical progress Comparative statics Primal-dual Expanded Shephard lemma Nonlinear errors-in-variables Translog US agriculture |
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