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Effects of Economic Factors on Adoption of Robotics and Consequences of Automation for Productivity Growth of Dairy Farms

  • Heikkilä, Anna-Maija
  • Myyrä, Sami
  • Pietola, Kyösti

In the long term, productivity and especially productivity growth are necessary conditions for the survival of a farm. In this paper, we focus on the technology choice of a dairy farm, i.e. the choice between a conventional and an automatic milking system. Our aim is to reveal the extent to which economic rationality explains investing in new technology. The adoption of robotics is further linked to farm productivity to show how capital-intensive technology has affected the overall productivity of milk production. In our empirical analysis, we apply a probit model and an extended Cobb-Douglastype production function to a Finnish farm-level dataset for the years 2000–10. The results show that very few economic factors on a dairy farm or in its economic environment can be identified to affect the switch to automatic milking. Existing machinery capital and investment allowances are among the significant factors. The results also indicate that the probability of investing in robotics responds elastically to a change in investment aids: an increase of 1% in aid would generate an increase of 2% in the probability of investing. Despite the presence of non-economic incentives, the switch to robotic milking is proven to promote productivity development on dairy farms. No productivity growth is observed on farms that keep conventional milking systems, whereas farms with robotic milking have a growth rate of 8.1% per year. The mean rate for farms that switch to robotic milking is 7.0% per year. The results show great progress in productivity growth, with the average of the sector at around 2% per year during the past two decades. In conclusion, investments in new technology as well as investment aids to boost investments are needed in low-productivity areas where investments in new technology still have great potential to increase productivity, and thus profitability and competitiveness, in the long run.

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Paper provided by Centre for European Policy Studies in its series Factor Markets Working Papers with number 142.

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Length: 18 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:eps:fmwppr:142
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  1. Kyösti Pietola & Anna-Maija Heikkilä, 2005. "Switching toward capital-intensive technologies in Finnish dairy farms," Agricultural Economics, International Association of Agricultural Economists, vol. 33(s3), pages 381-387, November.
  2. Petrick, Martin & Kloss, Mathias, 2012. "Drivers of agricultural capital productivity in selected EU member states," Working Papers 132838, Factor Markets, Centre for European Policy Studies.
  3. Kumbhakar, Subal C & Heshmati, Almas & Hjalmarsson, Lennart, 1999. " Parametric Approaches to Productivity Measurement: A Comparison among Alternative Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 405-24, September.
  4. David Zilberman & Doug Parker, 1996. "Explaining Irrigation Technology Choices: A Microparameter Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1064-1072.
  5. Sipilainen, Timo & Kuosmanen, Timo & Kumbhakar, Subal C., 2008. "Measuring productivity differentials – An application to milk production in Nordic countries," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44277, European Association of Agricultural Economists.
  6. Ky–sti Pietola & Minna V”re & Alfons Oude Lansink, 2003. "Timing and type of exit from farming: farmers' early retirement programmes in Finland," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 99-116, March.
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