A General-Equilibrium Model of Labor-Saving Technology Adoption: Theory and Evidences from Robotic Milking Systems in Idaho

Abstract

Automatic milking systems (AMSs) have become increasingly common in the US in the past few years. Recent surveys from Idaho, one of the largest dairy-producing states, as well as from other states and countries, suggest that: 1. among farms adopting robotic milking systems, few are reporting less labor usage after adopting this labor-saving technology; 2. small farms rather than large farms are adopting (or more interested in adopting) robotic milking systems. In this article, we propose a series of new modeling strategies, which introduces the role of general-equilibrium effects to explain these new stylized facts. We show that: first, farms adopting labor-saving technology may, in fact, use more labor to compensate for the loss in the value of labor; second, when smaller farms experience more labor efficiency gains or value their leisure time (or off-farm income) more, they are more likely than larger farms to adopt the new technology. We contribute to the technology-adoption literature in two important ways. First, to our knowledge, this is the first article that introduces general-equilibrium effects to the technology-adoption literature. Second, this is also the first article that provides a theoretical perspective to explain the stylized facts in the adoption of robotic milking systems.