An economic perspective on Iowa farm diversification in the twentieth century

Matthew Edward Miller

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The thesis examines farm-level diversification in Iowa over the past century. Economic theory is employed to propose explanations for observed trends in diversification. The hypothesis says that agricultural production technology has been the driving force behind the emergence of large, highly specialized farms in Iowa. Applications from portfolio theory, the theory of the farm, and agronomics are also utilized to flesh out the theory section. Two indexes, entropy and the Hirschman-Herfindahl index, are constructed using production and price data from the Census of Agriculture. The indices show diversification as relatively constant from 1885 to 1930, after which, a strong specialization trend is evident through 1997 (the extent of the data). Case studies on hybrid corn production, mechanization, soybeans, and the industrialization of livestock are conducted to supplement the indices. An econometric test, the Granger test of causality, is carried out to test for a causal link running from technology to diversification. Public spending on agricultural production technology is used as a proxy for technology, while the index data is used for diversification. Finally, the conclusion gives suggestions for future research and offers thoughts on the future of Iowa farm diversification.

Date: 2003-01-01
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