Labor Cost and Technology Adoption: Least Squares Monte Carlo Method for the Case of Sugarcane Mechanization in Florida

The prospect of immigration reform has renewed farmers’ concerns of serious labor shortages and cost increases, which may urge highly labor-intensive specialty crop farmers to switch to less-labor-intensive technology. The large-scale mechanization of the Florida sugarcane harvest during the 1970s/80s serves as an historical example of how technologies evolved due to changes in local labor market conditions. We analyze the dynamic decision-making process of sugarcane farmers in the relevant period using net present value (NPV) approach and real options approach (ROA) with least squares Monte Carlo (LSMC).