Income Effects of Innovation: The Case of Labor in Agriculture

Abstract

HE assignment to examine the effects of innovation or technological change on incomes in agriculture presents many alternative lines of analysis. Assuming that a suitable measure of technological change is at hand, one could focus on either the distribution of income among individuals (personal distribution) or the distribution among classes of factors such as land, labor, and capital (functional distribution). Even though these two approaches sound quite distinct they both have to do with the welfare of individuals in an economy that is undergoing rapid change. Much of the current popular and professional interest in the subject arises because of the fear that incomes of many individuals will be depressed by technological change. In considering this problem with respect to the farm sector, Schultz [6, p. 55] concludes, hard core of our agricultural adversity is in the unprecedented transformation of agriculture and the massive decline in the farm population that this transformation entails. The burden of the transformation does not fall on land or on farm property generally. It falls on people, on particular groups of people. The impact of technological change on the personal distribution of income might be investigated by looking at a frequency distribution of income among farmers (and nonfarmer owners of agricultural resources such as land) before and after a technological change. Such an analysis might be compared to the analysis of the incidence of a change in the tax structure.' An analysis concerned with causation of the change in the personal distribution of income would have to account for (a) the change (relative and absolute) in factor wage rates and (b) the distribution of ownership of those factors (because different quantities and mixes of resources are owned by individuals). Most of the analysis of income distribution has concentrated on changes in factor wage rates, probably because data on the distribution of ownership of factors is hard to get and because the theory of the firm has produced models of the returns to fac-

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