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A test for complementarities among multiple technologies that avoids the curse of dimensionality

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  • Yu, Li
  • Hurley, Terrance M.
  • Kliebenstein, James
  • Orazem, Peter

Abstract

We propose a strategy to identify the complementarity or substitutability among technology bundles. Under the assumption that alternative technologies are independent, we develop a hypothetical distribution of multiple technology adoptions. Differences between the observed distribution of technology choices and the hypothetical distribution can be subjected to statistical tests. Combinations of technologies that occur with greater frequency than would occur under independence are complementary technologies. Combinations that occur with less frequency are substitute technologies. This method is easily applied to simultaneous decisions regarding many technologies. We use the strategy to evaluate multiple technology adoptions on U.S. hog farms. We find that some technologies used in pork production are substitutable for one another while others are complementary. However, as the number of bundled technologies increases, they are increasingly likely to be complementary with one another, even if subsets are substitutes when viewed in isolation. This finding suggests that farmers have an incentive to adopt many technologies at once. Larger farms and farms run by more educated operators are the most likely to adopt multiple technologies. The complementarity among technologies in large bundles is contributing to a form of returns to scale that contributes to growth in average farm size.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12983.

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Date of creation: 31 Jul 2008
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Publication status: Published in Economics Letters, September 2012, vol. 116 no. 3, pp. 354-357
Handle: RePEc:isu:genres:12983

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Keywords: human capital; technology; adoption; complementarity; substitutability; independence; hogs; pork; farm size;

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References

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  1. Martin Carree & Boris Lokshin & René Belderbos, 2011. "A note on testing for complementarity and substitutability in the case of multiple practices," Journal of Productivity Analysis, Springer, Springer, vol. 35(3), pages 263-269, June.
  2. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, American Economic Association, vol. 87(3), pages 291-313, June.
  3. Jeffrey H. Dorfman, 1996. "Modeling Multiple Adoption Decisions in a Joint Framework," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 78(3), pages 547-557.
  4. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economics Reports, United States Department of Agriculture, Economic Research Service 33971, United States Department of Agriculture, Economic Research Service.
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Cited by:
  1. D. Thorleuchter & D. Van Den Poel, 2012. "Technology Classification with Latent Semantic Indexing," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 12/814, Ghent University, Faculty of Economics and Business Administration.
  2. Kassie, Menale & Jaleta, Moti & Shiferaw, Bekele & Mmbando, Frank & Muricho, Geoffrey, 2012. "Plot and Household-Level Determinants of Sustainable Agricultural Practices in Rural Tanzania," Discussion Papers, Resources For the Future dp-12-02-efd, Resources For the Future.
  3. D. Thorleuchter & D. Van Den Poel, 2013. "Quantitative Cross Impact Analysis with Latent Semantic Indexing," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 13/861, Ghent University, Faculty of Economics and Business Administration.
  4. An, Henry, 2012. "Complementarities in Production Technologies: An Empirical Analysis of the Dairy Industry," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124653, Agricultural and Applied Economics Association.
  5. Kassie, Menale & Jaleta, Moti & Shiferaw, Bekele A. & Mmbando, Frank & Mekuria, Mulugetta, 2012. "Interdependence in Farmer Technology Adoption Decisions in Smallholder Systems: Joint Estimation of Investments in Sustainable Agricultural Practices in Rural Tanzania," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 126791, International Association of Agricultural Economists.
  6. D. Thorleuchter & D. Van Den Poel, 2013. "Semantic Compared Cross Impact Analysis," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 13/862, Ghent University, Faculty of Economics and Business Administration.
  7. D. Thorleuchter & D. Van Den Poel, 2012. "Protecting Research and Technology from Espionage," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 12/824, Ghent University, Faculty of Economics and Business Administration.

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