Description: Job Market Practice Talk: Jake Smith (Iowa State University)
Location: 368A Heady Hall
Abstract: As Schumpeter observed, the process of technological change involves creative destruction of the existing economic structure. In this paper, I theoretically and empirically investigate creative destruction in agricultural production due to a major new technology, genetically engineered (GE) crop varieties. Specifically, I study how consolidation of farmland into larger farms owned by fewer farmers was affected by the introduction and adoption of GE corn seed. I hypothesize that successfully using GE seeds requires adopting farmers to learn about the new technology. I develop a model to show that this learning by doing leads to higher adoption rates for farmers with more land, which in turn allows these larger farmers to profitably buy land from smaller farmers. Using detailed data on the adoption of GE corn and U.S. Census of Agriculture data, I present novel empirical evidence consistent with the predictions of the learning-by-doing model. I then use a difference-in-difference approach, guided by the theoretical model, to estimate the impact that the GE seed introduction had on farmers exiting the market. I estimate that the introduction of GE seeds led to an exit of about 18,300 corn-growing operations, or 4% of the corn-growing operations existing in 1997. This amount of exit represents 13% of the net exit of nearly 150,000 corn-growing operations between 1997 and 2017.