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

Margriet F. Caswell and Robbin Shoemaker

No 157047, Technical Bulletins from United States Department of Agriculture, Economic Research Service

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.

Keywords: Agricultural and Food Policy; Demand and Price Analysis; Land Economics/Use; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 23
Date: 1993-09
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:uerstb:157047

DOI: 10.22004/ag.econ.157047

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