Farmers’ Capital Expenditures, Who Benefits?

Extract

Farm employment fell from 12.8 million workers in 1929 to 4.4 million in 1974. One frequent explanation for this drastic drop in employment is the replacement of labor inputs in this sector by cheaper and more productive capital inputs. Assuming the farm labor market was in equilibrium at the start of this substitution process (admittedly a weak assumption but not crucial to this paper) the farm workers forced out of their chosen occupations were the most apparent losers in the process. If labor's share of the farm income dollar did not decrease as rapidly as the number of workers, then the remaining farm workers would be one group of beneficiaries of the process. Another would be society in general if total productivity increased. This paper will examine another potential group of beneficiaries, the shareholders and workers in the rest of the economy whose business and employment are tied to the provision of fixed capital inputs for the farming sector. Data availability, unfortunately, only allows us to identify economic implications for these groups at one point, 1971, in this ongoing process of transition. Nevertheless, these results are of interest since the groups who have benefited have not likely changed and our understanding of the rural adjustment process as well as the impact of technological innovations may be enhanced.