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Geographic aggregation and induced innovation in American agriculture


  • Qinghua Liu
  • C. Richard Shumway


The induced innovation hypothesis is tested for the USA and western regions using cointegration procedures. An error correction model separates short-run and long-run effects of relative price changes. A significant difference in the elasticities of factor substitution along the isoquant and the innovation possibility curve implies induced innovation. The estimated results support the hypothesis for Washington, the Pacific Northwest, and the Western Region, but not for the nation. Corroborative tests of weak exogeneity fail to support the hypothesis in any of the geographic units. Changes in output level and research investment do not significantly bias agricultural technology in the USA.

Suggested Citation

  • Qinghua Liu & C. Richard Shumway, 2006. "Geographic aggregation and induced innovation in American agriculture," Applied Economics, Taylor & Francis Journals, vol. 38(6), pages 671-682.
  • Handle: RePEc:taf:applec:v:38:y:2006:i:6:p:671-682
    DOI: 10.1080/00036840500397457

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    References listed on IDEAS

    1. David Blake & Angelika Nied, 1997. "The demand for alcohol in the United Kingdom," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1655-1672.
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    Cited by:

    1. Yucan Liu & C. Richard Shumway, 2009. "Induced Innovation in U.S. Agriculture: Time-series, Direct Econometric, and Nonparametric Tests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 224-236.
    2. Yucan Liu & C. Richard Shumway & Robert Rosenman & Virgil Eldon Ball, 2011. "Productivity growth and convergence in US agriculture: new cointegration panel data results," Applied Economics, Taylor & Francis Journals, vol. 43(1), pages 91-102.
    3. Orachos Napasintuwong Artachinda, 2011. "Modeling Directions of Technical Change in Agricultural Sector," Working Papers 201101, Kasetsart University, Department of Agricultural and Resource Economics.
    4. Shumway, C. Richard & Liu, Yucan, 2006. "Induced Innovation in the Agricultural Sector: Evidence From a State Panel," 2006 Annual meeting, July 23-26, Long Beach, CA 21089, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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