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Risk, ambiguity and the adoption of new technologies: experimental evidence from a developing economy

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  • Ross, Nicholas
  • Santos, Paulo
  • Capon, Timothy
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    Abstract

    The slow adoption of innovations in less developed countries has long been a puzzle, given the high expected returns. This paper investigates the role of ambiguity-aversion as a fundamental behavioral determinant of technology adoption, motivated by the fact that, almost by definition, farmers have less certain information about the outcomes of new technologies compared with traditional technologies. Using primary data from field experiments used to measure behavioral parameters such as risk and ambiguity aversion, we find that farmers' aversion to ambiguity (but not risk aversion) limits the adoption of new technologies, even when expected profits are quite high. Interventions that reduce uncertainty (in place of interventions that reduce risk) seem a promising way of speeding up the adoption of innovations.

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    File URL: http://purl.umn.edu/126492
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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 126492.

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    Date of creation: 2012
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    Handle: RePEc:ags:iaae12:126492

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    Keywords: International Development; Research and Development/Tech Change/Emerging Technologies; Risk and Uncertainty;

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    1. Ephraim Nkonya & Ted Schroeder & David Norman, 1997. "Factors Affecting Adoption Of Improved Maize Seed And Fertiliser In Northern Tanzania," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 1-12.
    2. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February.
    3. Akay, Alpaslan & Martinsson, Peter & Medhin, Haileselassie & Trautmann, Stefan T., 2009. "Attitudes toward Uncertainty among the Poor: Evidence from Rural Ethiopia," IZA Discussion Papers 4225, Institute for the Study of Labor (IZA).
    4. Brian W. Gould & William E. Saupe & Richard M. Klemme, 1989. "Conservation Tillage: The Role of Farm and Operator Characteristics and the Perception of Soil Erosion," Land Economics, University of Wisconsin Press, vol. 65(2), pages 167-185.
    5. John Knight & Sharada Weir & Tassew Woldehanna, 2003. "The role of education in facilitating risk-taking and innovation in agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 39(6), pages 1-22.
    6. Munshi, Kaivan, 2004. "Social learning in a heterogeneous population: technology diffusion in the Indian Green Revolution," Journal of Development Economics, Elsevier, vol. 73(1), pages 185-213, February.
    7. Duraisamy, P., 2002. "Changes in returns to education in India, 1983-94: by gender, age-cohort and location," Economics of Education Review, Elsevier, vol. 21(6), pages 609-622, December.
    8. P. Duraisamy, 2000. "Changes in Returns to Education in India, 1983-94: By Gender, Age-Cohort and Location," Working Papers 815, Economic Growth Center, Yale University.
    9. Sujoy Chakravarty & Jaideep Roy, 2009. "Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study," Theory and Decision, Springer, vol. 66(3), pages 199-228, March.
    10. Halevy, Yoram, 2005. "Ellsberg Revisited: an Experimental Study," Microeconomics.ca working papers halevy-05-07-26-11-51-13, Vancouver School of Economics, revised 25 Feb 2014.
    11. Sunding, David & Zilberman, David, 2001. "The agricultural innovation process: Research and technology adoption in a changing agricultural sector," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 4, pages 207-261 Elsevier.
    12. Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2007. "Ambiguity Aversion As A Predictor Of Technology Choice: Experimental Evidence From Peru," Departmental Working Papers 2007-04, McGill University, Department of Economics.
    13. Terry L. Kastens & Allen M. Featherstone, 1996. "Feedforward Backpropagation Neural Networks in Prediction of Farmer Risk Preferences," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 400-415.
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