Frictionless Technology Diffusion: The Case of Tractors

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