Economic and Environmental Impacts of Bt Cotton: Evidence from Pakistan

This study estimates the benefits from adopting Bt cotton seeds in Punjab, Pakistan over two cropping seasons in 2008 and 2009. This study uses reduced-form panel models to determine the average effects of Bt cotton technology on short-run profits, yields and farm inputs.This reduced form approach controls for biases resulting from selfselection and endogenous farm inputs. The study shows that farmers grow Bt cotton because it provides resistance against cotton bollworms infestations and gives higher yields. On average, econometric estimation suggests that Bt adopting farmers receive 10 percent higher yields per hectare, reduce per hectare pesticide use by some 22 percent, and increase per hectare use of irrigation water by 8 percent as a result of a conversion of 78% of cropped area into Bt cotton. Our estimates of the increase in cotton yield are below estimates from previous studies conducted in Pakistan and India, which do not use panel methods. Allowing more Bt cotton varieties and ensuring the availability of quality Bt cotton seeds in the market is likely to lead to further increase in the private benefits from Bt cotton, but raises legitimate concerns related to irrigation water availability and biodiversity losses.