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The Adoption and Diffusion of GM Crops in USA: A Real Option Approach

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Abstract

The paper aims at modelling adoption and diffusion decisions of farmers towards genetically modified crops under a real option framework. Modern GM crops help farmers to resolve two main sources of uncertainty: output uncertainty and input uncertainty. Those crops represent a revolutionary form of farming compared to the technology adoption studied in the literature in the late ‘70s-early ‘80s. The paper develops a theoretical model of adoption and diffusion of new GM crops under uncertainty and irreversibility. We test our theoretical predictions using data from 2000 to 2008 of a panel dataset constructed for 13 states of USA involved into the production of 4 different GM crop. These conclusions may appear to contradict the general perception of a delayed penetration for the GM crops, whose success seems to be retarded by lack of information, mistrust and an exaggerated perception of risks. GM crops tend to be invasive, in that their short term profitability is so high as compared with the investment needed, that once the hump of uncertainty is overcome, they operate a veritable takeover of agriculture

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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 169.

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Length: 30 pages
Date of creation: 20 Jul 2010
Date of revision: 20 Jul 2010
Handle: RePEc:rtv:ceisrp:169

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Related research

Keywords: Adoption; Diffusion; Uncertainty; Irreversibility; Real Option;

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References

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  1. Just, Richard E & Zilberman, David, 1983. "Stochastic Structure, Farm Size and Technology Adoption in Developing Agriculture," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 307-28, July.
  2. 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.
  3. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
  4. Feder, Gershon & O'Mara, Gerald T, 1981. "Farm Size and the Diffusion of Green Revolution Technology," Economic Development and Cultural Change, University of Chicago Press, vol. 30(1), pages 59-76, October.
  5. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier, Elsevier.
  6. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, American Economic Association, vol. 100(1), pages 35-69, March.
  7. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-43, May.
  8. Feder, Gershon & Savastano, Sara, 2006. "The role of opinion leaders in the diffusion of new knowledge: The case of integrated pest management," World Development, Elsevier, Elsevier, vol. 34(7), pages 1287-1300, July.
  9. Reimund, Donn A. & Martin, J. Rod & Moore, Charles V., 1981. "Structural Change in Agriculture: The Experience for Broilers, Fed Cattle, and Processing Vegetables," Technical Bulletins, United States Department of Agriculture, Economic Research Service 157701, United States Department of Agriculture, Economic Research Service.
  10. Kaliba, Aloyce R. M. & Featherstone, Allen M. & Norman, David W., 1997. "A stall-feeding management for improved cattle in semiarid central Tanzania: factors influencing adoption," Agricultural Economics, Blackwell, Blackwell, vol. 17(2-3), pages 133-146, December.
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Cited by:
  1. Fernandez-Cornejo, Jorge & Wechsler, Seth James, 2012. "Fifteen Years Later: Examining the Adoption of Bt Corn Varieties by U.S. Farmers," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124257, Agricultural and Applied Economics Association.
  2. Wesseler, Justus & Smyth, Stuart J. & Scatasta, Sara, 2010. "Overview of special issue from the 2009 ICABR Conference," MPRA Paper 25601, University Library of Munich, Germany.
  3. Fernandez-Cornejo, Jorge & Wechsler, Seth James, 2011. "Revisiting the Impact of Bt Corn Adoption by U.S. Farmers," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania, Agricultural and Applied Economics Association 103327, Agricultural and Applied Economics Association.

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