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Risk, uncertainty, and learning in adoption of a crop innovation

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  • Amir K. Abadi Ghadim
  • David J. Pannell
  • Michael P. Burton

Abstract

Risk and uncertainty have often been suggested as causes of poor adoption of rural innovations, but empirical evidence has been scarce. This study focuses on a new crop-type, chickpeas, in Western Australia to gather such evidence. The empirical models developed are based on a theoretical framework that conceptualizes adoption as a dynamic decision process involving information acquisition and learning-by-doing by growers who vary in their managerial abilities, risk preferences, and their perceptions of the profitability and riskiness of the innovation. Learning encompasses improvements in skill as well as reductions in uncertainty. An annual face-to-face survey of over 100 farmers was conducted over 3 years, eliciting the farmers' risk attitudes and their subjective distributions of yields and prices. Two limited dependent variable models, Tobit and Probit, are used to estimate the empirical model. There is a high degree of goodness-of-fit for both models. The study provides strong empirical support for the primarily economic character of the adoption decision, and highlight the importance of economic risk in the process. The two risk-related factors with greatest impact on the adoption decision were risk aversion and relative riskiness of the innovation. Risk aversion tended to reduce adoption, and to do so to a greater extent as relative riskiness and scale increased. Results also reveal the key role that trialing of the innovation plays in adoption. Copyright 2005 International Association of Agricultural Economics.

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Bibliographic Info

Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

Volume (Year): 33 (2005)
Issue (Month): 1 (07)
Pages: 1-9

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Handle: RePEc:bla:agecon:v:33:y:2005:i:1:p:1-9

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Cited by:
  1. Paul Winters & Lina Salazar & Alessandro Maffioli, 2010. "Designing Impact Evaluations for Agricultural Projects," SPD Working Papers 1007, Inter-American Development Bank, Office of Strategic Planning and Development Effectiveness (SPD).
  2. Tzouramani, Irene & Sintori, Alexandra & Liontakis, Angelos E. & Alexopoulos, George, 2010. "Assessing agricultural policy incentives for Greek organic agriculture: A Real options approach," 114th Seminar, April 15-16, 2010, Berlin, Germany 61096, European Association of Agricultural Economists.
  3. Jackson, Elizabeth & Quaddus, Mohammed & Islam, Nazrul & Stanton, John, 2008. "A mixed-method approach for determining the risk and complexity farmers associate with using forward contracts," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 42305, Agricultural Economics Society.
  4. Kotsiri, Sofia & Rejesus, Roderick M. & Marra, Michele C. & Velandia, Margarita M., 2011. "Farmers' Perceptions about Spatial Yield Variability and Precision Farming Technology Adoption: An Empirical Study of Cotton Production in 12 Southeastern States," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98689, Southern Agricultural Economics Association.
  5. Greiner, Romy & Patterson, Louisa & Miller, Owen, 2009. "Motivations, risk perceptions and adoption of conservation practices by farmers," Agricultural Systems, Elsevier, vol. 99(2-3), pages 86-104, February.
  6. Pannell, David J & Llewellyn, Rick S & Corbeels, Marc, 2013. "The farm-level economics of conservation agriculture for resource-poor farmers," Working Papers 166526, University of Western Australia, School of Agricultural and Resource Economics.
  7. BLAZY Jean-Marc & CARPENTIER Alain & THOMAS Alban, 2008. "An ex ante adoption model of low input innovations applied to banana growers in the French West Indies," LERNA Working Papers 08.32.276, LERNA, University of Toulouse.
  8. Beltran, Jesusa C. & Pannell, David J. & Doole, Graeme J. & Benedict, White, 2011. "Factors that affect the use of herbicides in Philippine rice farming systems," Working Papers 108769, University of Western Australia, School of Agricultural and Resource Economics.
  9. Farquharson, Robert J. & Sareth, Chea & Somrangchittra, Chapho & Martin, Robert J. & Haigh, Bruce M & Scott, J. Fiona & Sopheap, Ung, 2006. "Changes in Management Can Improve Returns from Cambodian Upland Crops," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25602, International Association of Agricultural Economists.
  10. Rico García-Amado, Luis & Ruiz Pérez, Manuel & Dahringer, Guillaume & Reyes Escutia, Felipe & Barrasa García, Sara & Contreras Mejía, Elsa, 2013. "From wild harvesting to agroforest cultivation: A Chamaedorea palm case study from Chiapas, Mexico," Forest Policy and Economics, Elsevier, vol. 28(C), pages 44-51.
  11. Greiner, Romy & Miller, Owen & Patterson, Louisa, 2008. "The role of grazier motivations and risk attitudes in the adoption of grazing best management practices," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6002, Australian Agricultural and Resource Economics Society.
  12. Kuehne, Geoff & Llewellyn, Rick S. & Pannell, David J. & Wilkinson, Roger & Dolling, P. & Ewing, Michael A., 2011. "ADOPT: a tool for predicting adoption of agricultural innovations," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100570, Australian Agricultural and Resource Economics Society.
  13. Kondylis, Florence & Mueller, Valerie, 2012. "Seeing is Believing? Evidence from a Demonstration Plot Experiment in Mozambique:," MSSP working papers 1, International Food Policy Research Institute (IFPRI).
  14. Abebe, Gumataw K. & Bijman, Jos & Pascucci, Stefano & Omta, Onno, 2013. "Adoption of improved potato varieties in Ethiopia: The role of agricultural knowledge and innovation system and smallholder farmers’ quality assessment," Agricultural Systems, Elsevier, vol. 122(C), pages 22-32.
  15. Nguyen, V.H. & Llewellyn, Rick S. & Miyan, M.S., 2007. "Explaining adoption of durum wheat in Western Australia," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 15.

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