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Induced Innovation and Marginal Cost of New Technology

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  • Yucan Liu
  • C. Richard Shumway

    ()
    (School of Economic Sciences, Washington State University)

Abstract

The hypothesis of induced innovation has been empirically tested in many ways, using a wide variety of data and test periods for many industries in many countries. However, each test has maintained the hypothesis that the relative marginal cost of developing and implementing technologies that save one input is the same as for any other input. Lacking data on development and implementation costs of input-saving technologies, we develop and use a nonparametric procedure to estimate relative differences required for technical change in U.S. agriculture to be consistent with the induced innovation hypothesis.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/Shumway/IIH_EconLetters-complete.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2008-6.

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Length: 13 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:wsu:wpaper:shumway-4

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Keywords: induced innovation; marginal cost; nonparametric;

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  1. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
  2. Acemoglu, Daron, 2002. "Directed Technical Change," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 781-809, October.
  3. Hayami, Yujiro & Ruttan, Vernon W., 1969. "Factor Prices And Technical Change In Agricultural Development: The United States And Japan, 1880-1960," Staff Papers 14172, University of Minnesota, Department of Applied Economics.
  4. Jean-Paul Chavas & Michael Aliber & Thomas L. Cox, 2000. "An Analysis Of The Source And Nature Of Technical Change: The Case Of U.S. Agriculture," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 482-492, August.
  5. Kawagoe, Toshihiko & Otsuka, Keijiro & Hayami, Yujiro, 1986. "Induced Bias of Technical Change in Agriculture: The United States and Japan, 1880-1980," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 523-44, June.
  6. Binswanger, Hans P., 1973. "The Measurement Of Technical Change Biases With Many Factors Of Production," Staff Papers 14205, University of Minnesota, Department of Applied Economics.
  7. Yucan Liu & C. Richard Shumway, 2008. "Induced Innovation in U.S. Agriculture: Time-series, Direct Econometric, and Nonparametric Tests," Working Papers 2008-3, School of Economic Sciences, Washington State University.
  8. Olmstead, Alan L & Rhode, Paul, 1993. "Induced Innovation in American Agriculture: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 100-118, February.
  9. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-97, May.
  10. V. Eldon Ball & Charles Hallahan & Richard Nehring, 2004. "Convergence of Productivity: An Analysis of the Catch-up Hypothesis within a Panel of States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1315-1321.
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