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Frictionless Technology Diffusion: The Case of Tractors

Author

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  • Rodolfo E. Manuelli
  • Ananth Seshadri

Abstract

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.

Suggested Citation

  • Rodolfo E. Manuelli & Ananth Seshadri, 2014. "Frictionless Technology Diffusion: The Case of Tractors," American Economic Review, American Economic Association, vol. 104(4), pages 1368-1391, April.
  • 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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    References listed on IDEAS

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    1. Nancy L. Rose & Paul L. Joskow, 1990. "The Diffusion of New Technologies: Evidence from the Electric Utility Industry," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 354-373, Autumn.
    2. Andrew Atkeson & Patrick J. Kehoe, 2007. "Modeling the Transition to a New Economy: Lessons from Two Technological Revolutions," American Economic Review, American Economic Association, vol. 97(1), pages 64-88, March.
    3. 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 322-347, April.
    4. 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.
    5. 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.
    6. Jovanovic, Boyan & Nyarko, Yaw, 1996. "Learning by Doing and the Choice of Technology," Econometrica, Econometric Society, vol. 64(6), pages 1299-1310, November.
    7. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
    8. Rodolfo E. Manuelli, 2000. "Technological Change, the Labor Market and the Stock Market," NBER Working Papers 8022, National Bureau of Economic Research, Inc.
    9. 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.
    10. Warren C. Whatley, 1985. "A History of Mechanization in the Cotton South: The Institutional Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1191-1215.
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    Citations

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    Cited by:

    1. Takeshima, Hiroyuki, 2015. "Market imperfections for tractor service provision in Nigeria: International perspectives and empirical evidence:," IFPRI discussion papers 1424, International Food Policy Research Institute (IFPRI).
    2. Daniel P. Gross, 2016. "Scale versus Scope in the Diffusion of New Technology: Evidence from the Farm Tractor," Harvard Business School Working Papers 16-108, Harvard Business School, revised Oct 2017.
    3. Stephen Ayerst, 2016. "Idiosyncratic Distortions and Technology Adoption," Working Papers tecipa-571, University of Toronto, Department of Economics.
    4. Danny McGowan & Chrysovalantis Vasilakis, 2015. "Reap What You Sow: Agricultural Productivity, Structural Change and Urbanization," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. Takeshima, Hiroyuki, 2015. "Identifying the effects of market imperfections for a scale biased agricultural technology: Tractors in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 211937, International Association of Agricultural Economists.
    6. Hansen, G.D. & Ohanian, L.E., 2016. "Neoclassical Models in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    7. Nancy L. Stokey, 2018. "Technology and Skill: Twin Engines of Growth," NBER Working Papers 24570, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • N51 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - U.S.; Canada: Pre-1913
    • N52 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - U.S.; Canada: 1913-
    • N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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