Induced Innovation in United States Agriculture, 1880–1990: Time Series Tests and an Error Correction Model
2002
Thirtle, Colin G. | Schimmelpfennig, David E. | Townsend, Robert E.
An error correction model (ECM) of induced innovation, based on the two‐stage CES production function allows direct tests of the inducement hypothesis, which are applied to U.S. data for 1880–1990. The time series properties of the variables include a structural break in 1920, cointegration is established and an ECM constructed, which allows factor substitution to be separated from technological change. Causality tests show that the factor‐price ratios and R…D are Granger‐prior to the factor‐saving biases of technological change. The inducement hypothesis is corroborated, and identified as one factor in the complex development of U.S. agriculture.
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