American Economic Review: Vol. 104 No. 4 (April 2014)

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Frictionless Technology Diffusion: The Case of Tractors

Article Citation

Manuelli, Rodolfo E., and Ananth Seshadri. 2014. "Frictionless Technology Diffusion: The Case of Tractors." American Economic Review, 104(4): 1368-91.

DOI: 10.1257/aer.104.4.1368

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.

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Authors

Manuelli, Rodolfo E. (Washington U in St Louis and Federal Reserve Bank of St Louis)
Seshadri, Ananth (U WI)

JEL Classifications

L62: Automobiles; Other Transportation 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: Transport, Trade, Energy, Technology, and Other Services: U.S.; Canada: Pre-1913
N72: Economic History: Transport, Trade, Energy, Technology, and Other Services: U.S.; Canada: 1913-
O33: Technological Change: Choices and Consequences; Diffusion Processes
Q11: Agriculture: Aggregate Supply and Demand Analysis; Prices


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