An econometric simulation model for evaluating aggregate economic impacts of technological change on major U.S. field crops

Abstract

Economists are increasingly faced with the task of evaluating the aggregate economic impacts of technological changes in agricultural production. These changes may include new advances in technology or reversed technology. New technology would include effective methods of weather modification, higher yielding crop varieties, improved livestock breeds and new production systems. The most prevalent example of "reverse" technology is banning the use of specific chemicals used in agricultural production. Consider the problem of evaluating the effects of withdrawing a pesticide without any historical data for conducting a positive evaluation. Under this condition, economists have tended to use experimental or best-guess data on the yield impact of technological change and address the aggregate economic effects with either partial budgeting or normative programming approaches. This study presents and applies a methodological approach that uses extraneous information with an econometric model to evaluate a technological change. Extraneous information is used as a basis to shift relevant supply curves to reflect the change in technology. Then, the relative aggregate economic impacts of the technological induced shift can be estimated by simulating future values of endogenous variables that may occur with and without the technological change. This approach is less subjective than the partial budgeting approach, and less expensive and time consuming than regional or national programming approaches. In this study, a multicrop regional econometric model (AGSIM) is constructed to estimate the aggregate effects of technological change. Commodities included in the model are com, small grains, grain sorghum, cottonlint, cottonseed, soybeans, cottonseed meal, cottonseed oil, soybean meal and soybean oil. Total U.S. field crop production is represented by thirteen producing regions and aggregate demand components. Technological shifts are introduced in the model by changing field crop yields and variable per acre production costs. Then, the simulation procedure traces through the effects of the technological change...