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Are the economic benefits of Bt cotton sustainable? Evidence from Indian panel data

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  • Jonas Kathage

    (Georg-August-University Göttingen)

  • Matin Qaim

    (Georg-August-University Göttingen)

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    Abstract

    While several studies have shown that genetically modified Bt cotton can benefit smallholder farmers economically, the sustainability of these effects is still unclear and debated controversially between biotechnology proponents and critics. We use unique panel data of 533 cotton farmers, collected in India between 2002 and 2008, to analyze Bt impacts on cotton yield, profit, and household living standards. Results from fixed effects models show that the adoption of Bt cotton is associated with a net yield gain of 24% and a profit increase of 50%. These benefits per acre were stable over time; there are even indications that they increased. Given rising adoption rates, the aggregate benefits grew substantially. We further show that Bt cotton adoption raised consumption expenditures, our measure of household living standards, by 18% during the 2006-2008 period. We conclude that Bt cotton has created large and sustainable benefits, which contribute to economic development in India.

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    Bibliographic Info

    Paper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 80.

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    Date of creation: 05 Jul 2011
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    Handle: RePEc:got:gotcrc:080

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    Keywords: biotechnology; Bt cotton; genetically modified crops; farm survey; household living standards; India; technology adoption;

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    1. Barrett, Christopher B. & Moser, Christine M. & Barison, Joeli & McHugh, Oloro V., 2003. "Better Technology, Better Plots or Better Farmers? Identifying Changes In Productivity and Risk Among Malagasy Rice Farmers," Working Papers, Cornell University, Department of Applied Economics and Management 127212, Cornell University, Department of Applied Economics and Management.
    2. Dercon, Stefan & Christiaensen, Luc, 2011. "Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia," Journal of Development Economics, Elsevier, Elsevier, vol. 96(2), pages 159-173, November.
    3. Matin Qaim & Arjunan Subramanian & Gopal Naik & David Zilberman, 2006. "Adoption of Bt Cotton and Impact Variability: Insights from India," Review of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 28(1), pages 48-58.
    4. Benjamin Crost & Bhavani Shankar & Richard Bennett & Stephen Morse, 2007. "Bias from Farmer Self-Selection in Genetically Modified Crop Productivity Estimates: Evidence from Indian Data," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 58(1), pages 24-36, 02.
    5. Matin Qaim, 2009. "The Economics of Genetically Modified Crops," Annual Review of Resource Economics, Annual Reviews, Annual Reviews, vol. 1(1), pages 665-694, 09.
    6. Jikun Huang & Ruifa Hu & Carl Pray & Fangbin Qiao & Scott Rozelle, 2003. "Biotechnology as an alternative to chemical pesticides: a case study of Bt cotton in China," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 509, China Economics and Management Academy, Central University of Finance and Economics.
    7. Huang, Jikun & Hu, Ruifa & Pray, Carl & Qiao, Fangbin & Rozelle, Scott, 2003. "Biotechnology as an alternative to chemical pesticides: a case study of Bt cotton in China," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 29(1), July.
    8. Stone, Glenn Davis, 2011. "Field versus Farm in Warangal: Bt Cotton, Higher Yields, and Larger Questions," World Development, Elsevier, Elsevier, vol. 39(3), pages 387-398, March.
    9. Huang, Jikun & Hu, Ruifa & van Meijl, Hans & van Tongeren, Frank, 2004. "Biotechnology boosts to crop productivity in China: trade and welfare implications," Journal of Development Economics, Elsevier, Elsevier, vol. 75(1), pages 27-54, October.
    10. Badi Baltagi & Seuck Song, 2006. "Unbalanced panel data: A survey," Statistical Papers, Springer, Springer, vol. 47(4), pages 493-523, October.
    11. Guillaume Gruere & Debdatta Sengupta, 2011. "Bt Cotton and Farmer Suicides in India: An Evidence-based Assessment," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 47(2), pages 316-337.
    12. Arjunan Subramanian & Matin Qaim, 2010. "The Impact of Bt Cotton on Poor Households in Rural India," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 46(2), pages 295-311.
    13. Richard Bennett & Uma Kambhampati & Stephen Morse & Yousouf Ismael, 2006. "Farm-Level Economic Performance of Genetically Modified Cotton in Maharashtra, India," Review of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 28(1), pages 59-71.
    14. Akhter Ali & Awudu Abdulai, 2010. "The Adoption of Genetically Modified Cotton and Poverty Reduction in Pakistan," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 61(1), pages 175-192.
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