Impacts of Precision Farming on the Structure of Agriculture (and Related Thoughts)

In this paper I first discuss the role of external capital constraints in limiting the ability of farmers to implement new technologies. Via a theoretical model, I illustrate the role of farm size in determining if a particular cost-reducing technology is implemented. I show that the cost savings associated with a new technology capable of reducing per-unit costs of production may not necessarily be accessible to farmers that face significant external capital constraints that limit farm expansion. Finally, I explain why cost-reducing technologies that have high up-front adoption costs act as a driving force for farm size expansion and the consequent reduction in the number of farms-an explanation for the structural changes that have dominated American agriculture for 75 years or more.

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Working or Discussion Paper
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JEL Codes:
Q16; Q12; Q18
Series Statement:
University of Kentucky Ag. Econ Staff Papers

 Record created 2017-04-01, last modified 2019-08-29

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