Working Paper: NBER ID: w15346
Authors: Tavneet Suri
Abstract: This paper investigates an empirical puzzle in technology adoption for developing countries: the low adoption rates of technologies like hybrid maize that increase average farm profits dramatically. I offer a simple explanation for this: benefits and costs of technologies are heterogeneous, so that farmers with low net returns do not adopt the technology. I examine this hypothesis by estimating a correlated random coefficient model of yields and the corresponding distribution of returns to hybrid maize. This distribution indicates that the group of farmers with the highest estimated gross returns does not use hybrid, but their returns are correlated with high costs of acquiring the technology (due to poor infrastructure). Another group of farmers has lower returns and adopts, while the marginal farmers have zero returns and switch in and out of use over the sample period. Overall, adoption decisions appear to be rational and well explained by (observed and unobserved) variation in heterogeneous net benefits to the technology.
Keywords: Technology Adoption; Heterogeneity; Agricultural Economics
JEL Codes: C33; O12; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high acquisition costs linked to poor infrastructure (H54) | low adoption rates (L96) |
| lower perceived benefits (J32) | higher likelihood of technology adoption (O33) |
| zero returns (C29) | switching in and out of hybrid maize use (Q16) |
| observable shocks (like rainfall) (Q54) | yields (G12) |
| farmers' characteristics (Q12) | decisions to adopt hybrid maize (Q16) |