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The Role of Production Risk in Sustainable Land-Management Technology Adoption in the Ethiopian Highlands

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  • Kassie, Menale
  • Yesuf, Mahmud
  • Köhlin, Gunnar

Abstract

This paper provides empirical evidence of production risk impact on sustainable land- management technology adoption, using two years of cross-sectional plot-level data collected in the Ethiopian highlands. We used a moment-based approach, which allowed a flexible representation of the production risk (Antle 1983, 1987). Mundlak’s approach was used to capture the unobserved heterogeneity along with other regressors in the estimation of fertilizer and conservation adoption. The empirical results revealed that impact of production risk varied by technology type. Production risks (variance and crop failure as measured by second and third central moments, respectively) had significant impact on fertilizer adoption and extent of adoption. However, this impact was not observed in adoption of conservation technology. On the other hand, expected return (as measured by the first central moment) had a positive significant impact on both fertilizer (adoption and intensity) and conservation adoption. Economic instruments that hedge against risk exposure, including downside risk and increase productivity, are important to promote adoption of improved technology and reduce poverty in Ethiopia.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-08-15-efd.

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Date of creation: 03 Apr 2008
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Handle: RePEc:rff:dpaper:dp-08-15-efd

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Keywords: Production risk; sustainable land management technology adoption; moment based estimation; Ethiopia;

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References

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  1. Gregory Amacher & Jeffrey Alwang, 2004. "Productivity and Land Enhancing Technologies in Northern Ethiopia: Health, Public Investments, and Sequential Adoption," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 321-331.
  2. Antle, John M, 1983. "Testing the Stochastic Structure of Production: A Flexible Moment-based Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(3), pages 192-201, July.
  3. Stein Holden & Hailu Yohannes, 2002. "Land Redistribution, Tenure Insecurity, and Intensity of Production: A Study of Farm Households in Southern Ethiopia," Land Economics, University of Wisconsin Press, vol. 78(4), pages 573-590.
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  5. Phoebe Koundouri & Céline Nauges & Vangelis Tzouvelekas, 2006. "Technology Adoption under Production Uncertainty: Theory and Application to Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 657-670.
  6. Shiferaw, Bekele & Holden, Stein T., 1998. "Resource degradation and adoption of land conservation technologies 1n the Ethiopian Highlands: A case study in Andit Tid, North Shewa," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 18(3), May.
  7. Lin, Tsai-Fen & Schmidt, Peter, 1984. "A Test of the Tobit Specification against an Alternative Suggested by Cragg," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 174-77, February.
  8. Holden, Stein & Shiferaw, Bekele, 2004. "Land degradation, drought and food security in a less-favoured area in the Ethiopian highlands: a bio-economic model with market imperfections," Agricultural Economics, Blackwell, vol. 30(1), pages 31-49, January.
  9. Grepperud, Sverre, 1996. "Population Pressure and Land Degradation: The Case of Ethiopia," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 18-33, January.
  10. Sierra, Rodrigo & Russman, Eric, 2006. "On the efficiency of environmental service payments: A forest conservation assessment in the Osa Peninsula, Costa Rica," Ecological Economics, Elsevier, vol. 59(1), pages 131-141, August.
  11. Robalino, Juan A. & Pfaff, Alexander, 2012. "Contagious development: Neighbor interactions in deforestation," Journal of Development Economics, Elsevier, vol. 97(2), pages 427-436.
  12. Pfaff, Alexander S. P. & Sanchez-Azofeifa, G. Arturo, 2004. "Deforestation pressure and biological reserve planning: a conceptual approach and an illustrative application for Costa Rica," Resource and Energy Economics, Elsevier, vol. 26(2), pages 237-254, June.
  13. John Pender & Marcel Fafchamps, 2006. "Land Lease Markets and Agricultural Efficiency in Ethiopia," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 251-284, June.
  14. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  15. Suleiman Abrar & Oliver Morrissey & Tony Rayner, 2004. "Crop-Level Supply Response by Agro-Climatic Region in Ethiopia," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(2), pages 289-311.
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Citations

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Cited by:
  1. Persson, U. Martin & Alpizar, Francisco, 2011. "Conditional Cash Transfers and Payments for Environmental Services: A Conceptual Framework for Explaining and Judging Differences in Outcomes," Discussion Papers dp-11-06-efd, Resources For the Future.
  2. Juma, Maurice & Nyangena, Wilfred & Yesuf, Mahmud, 2090. "Production Risk and Farm Technology Adoption in Rain-Fed, Semi-Arid Lands of Kenya," Discussion Papers dp-09-22-efd, Resources For the Future.
  3. Ogada, Maurice Juma & Nyangena, Wilfred & Yesuf, Mahmud, 2010. "Production risk and farm technology adoption in the rain-fed semi-arid lands of Kenya," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 4(2), June.
  4. Kassie, Menale & Zikhali, Precious & Manjur, Kebede & Edwards, Sue, 2008. "Adoption of Organic Farming Technologies: Evidence from Semi-Arid Regions of Ethiopia," Working Papers in Economics 335, University of Gothenburg, Department of Economics.
  5. Ogada, Maurice Juma & Nyangena, Wilfred & Yesuf, Mahmud, 2010. "Production risk and farm technology adoption in the rain-fed semi-arid lands of Kenya," Journal of Cooperatives, NCERA-210, vol. 4(2), June.
  6. Yesuf, Mahmud & Kassie, Menale & Köhlin, Gunnar, 2009. "Risk Implications of Farm Technology Adoption in the Ethiopian Highlands," Working Papers in Economics 404, University of Gothenburg, Department of Economics.
  7. Kassie, Menale & Zikhali, Precious & Pender, John & Köhlin, Gunnar, 2008. "Organic Farming Technologies and Agricultural Productivity: The case of Semi-Arid Ethiopia," Working Papers in Economics 334, University of Gothenburg, Department of Economics.

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