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Equilibrium Effects of Agricultural Technology Adoption: The Case of Induced Output Price Changes

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  • Caswell, Margriet F.
  • Shoemaker, Robbin A.

Abstract

Pollution from agricultural activity depends on the agricultural practices or technologies that farmers employ. Adoption of less polluting practices can be induced by a variety of policy instruments. Cost-$haring by the government to reduce the costs of technology adoption and/or implementation for producers is an instrument widely used by the U.S. Department of Agriculture. This report examines the problem of designing economically efficient cost-sharing programs. The adoption decision for a farm is based on a comparison of the relative profitability of the existing technology and a new, less polluting one where the profitability of each technology depends on land quality. The problem for government is to determine the optimal subsidy rates that will induce a level of adoption sufficient to achieve some exogenous pollution goal. A benchmark (or first best) solution to the pollution problem serves as a reference against which to compare the optima! cost-sharing policy with imperfect targeting of land. The authors also examine the importance of specifying the land on which a technology should be u~ed and of varying subsidy rates across inputs.

Suggested Citation

  • Caswell, Margriet F. & Shoemaker, Robbin A., 1993. "Equilibrium Effects of Agricultural Technology Adoption: The Case of Induced Output Price Changes," Technical Bulletins 157047, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerstb:157047
    DOI: 10.22004/ag.econ.157047
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    References listed on IDEAS

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    1. Margriet F. Caswell & David Zilberman, 1986. "The Effects of Well Depth and Land Quality on the Choice of Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 798-811.
    2. Reilly, John M., 1988. "Cost-reducing and output-enhancing technologies," Technical Bulletins 312287, United States Department of Agriculture, Economic Research Service.
    3. Thirtle, Colin G. & Ruttan, Vernon W., 1986. "The Role of Demand and Supply in the Generation and Diffusion of Technical Change," Bulletins 7522, University of Minnesota, Economic Development Center.
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    Cited by:

    1. Shoemaker, Robbin A., 1993. "Model of Participation in U.S. Farm Programs," Technical Bulletins 157043, United States Department of Agriculture, Economic Research Service.

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