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A multi-output cost function approach to induced innovation is adopted to analyze the impact of socioeconomic variables and institutional factors on technological change in agriculture. Focusing on the impact of immigration policy and farm mechanization, the study includes variables such as H-2A or guest workers, deportable Mexicans working in agriculture representing the percentage of unauthorized workers, the public and private research expenditures on farm mechanization and other research on agricultural technology. We found that over the 1971-1995 period, the technology was biased toward labor-saving technology, but was capital-neutral. The number of unauthorized workers had no significant effect on cost shares; the number of H-2A workers had a negative effect on the cost share of capital. Both had a positive effect on the revenue share of cereals. Public expenditures on mechanization have a significant impact on reducing the cost share of capital; however, private expenditures on machinery increase the cost share of capital. Using the Morishima elasticity of substitution, we found that labor was a substitute for capital when the price of capital changes, but when the price of labor changes, capital was not necessarily a substitute for labor.


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