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Frictionless Technology Diffusion: The Case of Tractors

  • Rodolfo E. Manuelli
  • Ananth Seshadri
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    Many new technologies display long adoption lags, and this is often interpreted as evidence of frictions inconsistent with the standard neoclassical model. We study the diffusion of the tractor in American agriculture between 1910 and 1960-a well-known case of slow diffusion-and show that the speed of adoption was consistent with the predictions of a simple neoclassical growth model. The reason for the slow rate of diffusion was that tractor quality kept improving over this period and, more importantly, that only when wages increased did it become relatively unprofitable to operate the alternative, labor-intensive, horse technology.

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    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 104 (2014)
    Issue (Month): 4 (April)
    Pages: 1368-91

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    Handle: RePEc:aea:aecrev:v:104:y:2014:i:4:p:1368-91
    Note: DOI: 10.1257/aer.104.4.1368
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    1. Andrew Atkeson & Patrick J. Kehoe, 2006. "Modeling the transition to a new economy: lessons from two technological revolutions," Staff Report 296, Federal Reserve Bank of Minneapolis.
    2. Boyan Jovanovic & Yaw Nyarko, 1994. "Learning By Doing and the Choice of Technology," NBER Working Papers 4739, National Bureau of Economic Research, Inc.
    3. Nancy L. Rose & Paul L. Joskow, 1988. "The Diffusion of New Technologies: Evidence From the Electric Utility Industry," NBER Working Papers 2676, National Bureau of Economic Research, Inc.
    4. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
    5. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-47, April.
    6. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    7. Sharon Oster, 1982. "The Diffusion of Innovation among Steel Firms: The Basic Oxygen Furnace," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 45-56, Spring.
    8. Whatley, Warren C, 1985. "A History of Mechanization in the Cotton South: The Institutional Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1191-1215, November.
    9. Olmstead, Alan L. & Rhode, Paul W., 2001. "Reshaping The Landscape: The Impact And Diffusion Of The Tractor In American Agriculture, 1910 1960," The Journal of Economic History, Cambridge University Press, vol. 61(03), pages 663-698, September.
    10. Rodolfo E. Manuelli, 2000. "Technological Change, the Labor Market and the Stock Market," NBER Working Papers 8022, National Bureau of Economic Research, Inc.
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