CANE CONTRACTING AND RENEGOTIATION - A FIXED EFFECTS ANALYSIS OF THE ADOPTION OF NEW TECHNOLOGIES IN THE CUBAN SUGAR-INDUSTRY, 1899-1929

This paper analyzes the institutional influences on the rate of adoption of new technologies in the sugar industry in Cuba during a period of considerable technological change and industrial reorganization. The paper argues that site specificity of the assets in the canefields imposed a long-term bilateral relationship between cane farmers and central mills. It caused mills that supplied their own land in cane-contracting relationships to be relatively more attractive to investors. The proposed hypothesis is that the mills which obtained a smaller share of their cane from landowning cane farmers adopted new, larger-scale technologies more quickly. A fixed effects model of the sugar manufacturer's decision to invest is constructed to test this hypothesis. The estimated fixed effects are used as indicators of the time-invariant, long-term structural factors on the rate of increase in mill capacities. Since the estimated fixed effects contain the influence of many variables, they are examined for correlations with observable structural influences. The results show that the rate of increase in mill capacities was influenced significantly both by the percentage of cane obtained from landowning cane farmers and by the orientation of the mills toward North America. (C) 1994 Academic Press, Inc.