Competitive Pressure and Technology Adoption: Evidence from a Policy Reform in Western Canada

Abstract

We measure the impact of the removal of a railway transportation subsidy on the adoption of technology for Western Canadian farms, using a unique combination of Census and freight rate data. We exploit the large regional variation in these one-time freight rate increases in order to identify causal effects of increased competitive pressure. Using a difference-in-differences methodology we find that higher freights rates – and hence lower farm gate prices – induced farmers to adopt new, more efficient production technology. We also find that farmers experiencing the greatest transportation cost increases also increased fertilizer usage and made significant land use changes.

Keywords: Agricultural Trade Liberalization, Export Subsidy, Technical Change

JEL Classification: F14, O13, Q16, Q17, Q18