Abstract

Diffusion of new technologies in competitive markets is often thought to be too slow relative to an optimal adoption trajectory due to learning-by-doing, learning-by-using, or network externalities. In this paper, in contrast, I study a phenomenon of hastened technology adoption facilitated by a negative spatial externality imposed by adopters on non-adopters. Focusing on new herbicide-tolerant seeds for soybean and cotton, I show that adoption by U.S. farmers was partly caused by wind carrying the drift-susceptible herbicide across plots. I estimate that being in the same wind corridor as an adopter increased the probability of adopting by about 29%. The externality also led to defensive adaptation: cropland was converted to crops able to withstand the herbicide, suggesting a form of protective land-use change to prevent damage. I then turn to broader consequences of the widespread adoption of the technology, including its overall effect on yields. A priori, the effect on yields is ambiguous. I find that overall, yields remained practically unchanged, despite increased crop failure. The rapid diffusion of this new technology and the consequences highlighted here call for the careful consideration of policies to address such inventions and of their accompanying side-effects.

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