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Ambiguity Aversion as a Predictor of Technology Choice: Experimental Evidence from Peru

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  • Jim Engle-Warnick

    ()

  • Javier Escobal
  • Sonia Laszlo

    ()

Abstract

The lack of adoption of new farming technologies despite known benefis is a well-documented phenomenon in development economics. In addition to a number of market constraints, risk aversion predominates the discussion of behavioral determinants of technology adoption. We hypothesize that ambiguity aversion may also be a determinant, since farmers may have less information about the distribution of yield outcomes from new technologies compared with traditional technologies. We test this hypothesis with a laboratory experiment in the field in which we measure risk and ambiguity preferences. We combine our experiment with a survey in which we collect information on farm decisions and identify market constraints. We find that ambiguity aversion does indeed predict actual technology choices on the farm. Un phénomène bien documenté en économie du développement est le nombre peu élevé d’agriculteurs qui décident d’adopter de nouvelles technologies en agriculture, malgré leurs avantages connus. En plus des nombreuses contraintes imposées par le marché, l’aversion au risque prédomine la discussion sur les déterminants de l’adoption de nouvelles technologies. Nous émettons l’hypothèse que l’aversion à l’ambiguïté pourrait aussi être un déterminant puisqu’il est possible que les agriculteurs aient moins d’information sur la distribution du rendement des nouvelles technologies que sur celle des technologies traditionnelles. Nous testons la validité de cette hypothèse avec une expérience en laboratoire sur le terrain où nous mesurons les préférences vis-à-vis du risque et de l’ambiguïté. Nous combinons notre expérience à un sondage portant sur les décisions prises en matière d’agriculture et identifiant les contraintes du marché. Nous constatons qu’effectivement, l’aversion à l’ambiguïté dicte les choix technologiques réels relatifs à la ferme.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2007s-01.

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Date of creation: 01 Jan 2007
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Handle: RePEc:cir:cirwor:2007s-01

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Keywords: experimental economics; risk measurement instruments; risk preferences; rural development; technology choice; choix technologiques; développement rural; économie expérimentale; instruments de mesure du risque; préférences vis-à-vis du risque;

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  9. Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2005. "The Effect of an Additional Alternative on Measured Risk Preferences in a Field Experiment," Experimental 0511003, EconWPA.
  10. Jim Engle-Warnick & Sonia Laszlo Author Email: sonia.laszlo@mcgill.ca, 2006. "Learning By Doing In An Ambiguous Environment," Departmental Working Papers 2006-29, McGill University, Department of Economics.
  11. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
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Cited by:
  1. Francisco Galarza, 2009. "Choices under risk in rural peru," Artefactual Field Experiments 00047, The Field Experiments Website.
  2. Ross, Nicholas & Santos, Paulo & Capon, Timothy, 2012. "Risk, ambiguity and the adoption of new technologies: experimental evidence from a developing economy," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126492, International Association of Agricultural Economists.
  3. Jeffery Carpenter & Juan Camilo Cardenas, 2006. "Behavioural Development Economics: Lessons from field labs in the developing world," Middlebury College Working Paper Series 0616, Middlebury College, Department of Economics.
  4. Francisco Alpizar & Fredrik Carlsson & Maria Naranjo, 2010. "The Effect of Risk, Ambiguity and Coordination on Farmers’ Adaptation to Climate Change: A Framed Field Experiment," Working Papers 2010.81, Fondazione Eni Enrico Mattei.
  5. Jim Engle-Warnick & Sonia Laszlo, 2006. "Learning-by-Doing in an Ambiguous Environment," CIRANO Working Papers 2006s-29, CIRANO.
  6. Ward, Patrick S. & Singh, Vartika, 2013. "Risk and Ambiguity Preferences and the Adoption of New Agricultural Technologies: Evidence from Field Experiments in Rural India," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150794, Agricultural and Applied Economics Association.
  7. Juan Camilo C�rdenas, 2009. "Experiments in Environment and Development," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 157-182, 09.
  8. Elizabeth Potamites & Bei Zhang, 2012. "Heterogeneous ambiguity attitudes: a field experiment among small-scale stock investors in China," Review of Economic Design, Springer, vol. 16(2), pages 193-213, September.
  9. Ward, Patrick S. & Singh, Vartika, 2014. "Risk and ambiguity preferences and the adoption of new agricultural technologies: Evidence from field experiments in rural India:," IFPRI discussion papers 1324, International Food Policy Research Institute (IFPRI).
  10. Alpízar, Francisco & Carlsson, Fredrik & Naranjo, Maria A., 2010. "Farmers’ Adaptation to Climate Change: A Framed Field Experiment," Discussion Papers dp-09-18-rev-efd, Resources For the Future.

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