Several quantitative methods have been developed to evaluate the Impacts of technological change on U.S. agriculture. The major weakness of prevailing models is that they consider the impact of technology on supply alone and are based on partial equilibrium analysis in one market. The use of partial equilibrium analysis ignores cross-market effect. For most goods, a supply shift directly affects quantity demanded by reducing the price of the commodity along a given demand curve. The resulting change in the equilibrium price may affect demand for substitute and complimentary goods, which in turn affect demand for the commodity being considered. The primary objective of this paper is to analyze price effects and substitution effects of technological change in interrelated markets. An econometric model was developed and applied to the beef and pork industries to measure the social impacts of technological change. The multimarket supply-demand model developed in this paper includes technology variables in the specification of supply functions and the model explicitly accounts for the fact that technological change in one market influences demand for related products This paper evaluates the welfare impact of technological change through the consumer-producer surplus model that incorporates the interaction of demand relationships for beef and pork. The results indicate that total returns for technological change in beef and pork are high. Technological change in beef affects economic surpluses in the pork market and technological change in pork affects economic surpluses in the beef market. The actual allocation of expenditures for technological development over the study period (1960-1988) was 70% for beef and 30% for pork. However, the optimal allocation would have been a 40-60 split between beef and pork.

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Working or Discussion Paper
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Series No. 91-9

 Record created 2017-04-01, last modified 2017-08-22

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