The distribution of returns from land efficiency improvement in multistage production systems

Abstract

This paper assesses the distributional consequences of technical changes that improve the efficiency of land and of other inputs in a multifactor crop‐production system. We introduced an equilibrium displacement model (EDM) by using the specification of a factor‐augmenting approach. Given the uncertainty about the EDM parameters, a Monte Carlo simulation is used to produce a distribution of possible return measures. We found that land suppliers (likely farmers) receive a larger share (73%) of total benefits from the adoption of land‐technical change than they do from the adoption of other input technologies. Each input supplier receives a larger share of total benefits from technical change in her own input. However, this result is sensitive to the value of the parameters, especially the value of the elasticity of substitution. We applied the EDM to the case of no‐tillage (NT) to provide insight into how the aggregate return from the adoption of NT was distributed among different groups on the Canadian Prairies. The results of this study can be used by policymakers and funding agencies in order to influence landowners and farming communities to adopt environmentally sound land technologies to achieve both greater agricultural productivity and sustainability.

Market power in smart farming and the distribution of gains in two‐stage crop production system

“…The elasticity of substitution's impact becomes clear in the Muth‐type model, as confirmed by prior studies (e.g., Awada & Phillips, 2020; Mullen et al, 1989). Farmers have been observed to demonstrate substitution behavior across inputs of production, even when prior guidance was accessible to them.…”

“…Due to its robust theoretical foundation, the model is extensively used in agriculture to assess technological changes, policy implications, and the effects of R&D investments on economic surplus distribution among stakeholders. Recent applications of this model are seen in works by Martini (2011), Okrent and Alston (2012), Hahn et al (2019), and Lusk (2017) that address agricultural policies; Zhang et al (2018), Mounter et al (2019), and Awada and Phillips (2020) that focus on new technology adoption; and Alston (2018) and Li et al (2019) that examine R&D investment returns. In this study, we reformulate a two‐stage crop production system, incorporating market power, referencing Holloway (1989), Kinnucan (2003), Sun (2006), and Ma et al (2019).…”

Costs and Benefits of Sustainability-Oriented Innovation in the Agri-food Industry: a Review

“…Generally speaking, SOI at the cultivation stage is of great direct benefit to the environment and can also bring significant financial benefits to farmers through improved productivity and quality. Awada and Phillips (2021) use an equilibrium displacement model to assess the profit-sharing consequences of technological innovations that improve the efficiency of land and other inputs in a multifactor crop production system. They show that the adoption of land-technical innovations provides more lucrative returns to landowners than other technological innovations.…”