Embodied-Technical Change of Farm Tractors in U.S. Agricultural Productivity Analysis: What Does the Hedonic Price Tell Us?

This study employs new data and a hedonic function to estimate the quality-adjusted price and quantity for farm tractors over the 1950-2011 period. The estimated hedonic prices for tractors are lower than the BLS’ tractor price index in most time periods. The lower prices result in a higher estimate of the tractor stock and service flow, which reflects an increase in embodied technical change of farm tractors. After replacing the BLS deflator of tractor investment with these hedonic estimates, average annual TFP growth dropped by 0.13 percentage points over the 1991-2011 period compared with the current USDA’s productivity estimate. These changes can be attributed to the contribution from embodied technical change in farm tractors over this period. The findings show the potential importance of input quality adjustment and can help to explain the sources of productivity growth.