Frictionless Technology Diffusion: The Case of Tractors

FRB of St. Louis Working Paper No. 2013-022B

34 Pages Posted: 4 Jul 2013 Last revised: 15 Mar 2015

See all articles by Rodolfo Manuelli

Rodolfo Manuelli

Washington University in St. Louis

Ananth Seshadri

University of Wisconsin - Madison - Department of Economics

Date Written: July 9, 2013

Abstract

Many new technologies display long adoption lags, and this is often interpreted as evidence of frictions inconsistent with the standard neoclassical model. In this paper 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 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.

Keywords: Technological change, productivity, tractors

JEL Classification: O3

Suggested Citation

Manuelli, Rodolfo and Seshadri, Ananth, Frictionless Technology Diffusion: The Case of Tractors (July 9, 2013). FRB of St. Louis Working Paper No. 2013-022B. Available at SSRN: https://ssrn.com/abstract=2289368 or http://dx.doi.org/10.2139/ssrn.2289368

Rodolfo Manuelli (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Ananth Seshadri

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-6196 (Phone)
608-263-3876 (Fax)

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