Technology and climatic effects in aggregate production functions
"Purpose of the Study: The justification for this study rests upon the last of the problems noted in the previous section. The primary purpose is to deal with the weather-technology problem in the agricultural production function and to simultaneously identify weather and technical effects. Interest in this problem is based from arguments made by Griliches (1963, 1964) who maintained that increases in agricultural productivity have been due to technology variables in the form of scale economies, public research expenditures, and education of the labor force. As will be apparent, the period for which Griliches made his study is one in which important and systematic year-to-year climatic fluctuations occurred. A major question then concerns whether or not Griliches' technology conclusions were simply due to climatic phenomena. The question can of course not be answered without including a measured weather variable. The latter is the object of this study. The major hypothesis is that the inclusion of weather effects in the aggregate agricultural production function reduces the presumed effects of education and research expenditures. Failure to reject this hypothesis would result in a modification of Griliches' favorable conclusions concerning education and research. A secondary objective of the study is to take advantage of the production function estimates derived for weather and technology in reassessing the static theory of supply response and related policy questions arising from the results on education and research. The chapters to follow structure the study in the following manner. In Chapter 2, different types of production function specifications are reviewed. The review includes a discussion of problems relating to aggregating variables and micro-equations, the rationale for using systems as opposed to single equations, and using equilibrium and experimental data. Shifters of the production function and how to include them in the specification are considered in Chapter 3. Two of these shifters are for weather and technological factors. Chapter 4 includes a description of the data and the derivation of the technical variables in terms of Griliches' arguments. Also, the particular weather variables used and the information pertaining to their selection are presented. Estimation procedures to be employed, including functional form, error specification, and two different techniques for handling the pooled time series and cross section data are contained in Chapter 5. Results of considering weather and technology in the production function and a comparison to Griliches' results are provided in Chapter 6. The estimates given in Chapter 6 are reviewed in Chapter 7 for their policy implications, including questions pertaining to supply response. More general implications in light of the information added by weather variables are examined in Chapter 8 which also includes a summary of the important points from the study and suggestions for future research on the topic of technology measurement."--Page 9.
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