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Selection and Comparative Advantage in Technology Adoption

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Author Info
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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15346.

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Date of creation: Sep 2009
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Handle: RePEc:nbr:nberwo:15346

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C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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