Three essays on technology adoption, firm size, wages and human capital

Li Yu ()

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

Abstract: This dissertation consists of three essays on the interrelationships between multiple technology adoptions, firm size, wages and human capital. The application is to four surveys of producers and employees in the US hog industry in the last two decades.;The first chapter investigates the size-wage premium in the competitive hog market. Particular attention is paid to the matching process by which workers are linked to farms of differing size and technology mix, and to whether the matching process can explain differences in wages across farms. The sector is characterized by large wage premia paid to workers on larger and more technologically advanced farms that persist over time. These wage premia are found for workers of all skills and are not reduced when methods are employed to control for nonrandom sorting across farms.;The second chapter shows that current methods to test for the complementarity or substitutability between technologies have been subject to the curse of dimensionality. Efforts to deal with more than a few technologies have had to impose that the technologies are independent or substitutes for tractability. The chapter presents a strategy to identify complementarity or substitutability that can be easily applied to any number of technologies. The method is applied to choices of eight technologies commonly used on U.S. hog farms. Technologies are increasingly likely to be complementary with one another as the number of bundled technologies increases, even if subsets are substitutes when viewed in isolation. As a result, farmers have an incentive to adopt many technologies at once, contributing to the trend toward larger farms over the sample period. It is the most educated producers that tend to adopt more technologies and to have larger farms.;The third chapter tests whether production on U.S. hog farms can be characterized as an O-Ring production process (Kremer, QJE, 1993), in which a single mistake in any one of several tasks in the firm's production process can lead to catastrophic failure of the product's value. Consistent with the theory, distributions of wages, technology adoptions, and farm size are all skewed to the right. The most skilled workers concentrate in the largest and most technologically advanced farms and paid highest. As with observed skills, workers with the greatest endowments of unobserved skills also sort themselves into the largest and most technology intensive farms.

Date: 2008-01-01
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