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Risk, uncertainty, and learning in adoption of a crop innovation


  • Amir K. Abadi Ghadim
  • David J. Pannell
  • Michael P. Burton


Risk and uncertainty have often been suggested as causes of poor adoption of rural innovations, but empirical evidence has been scarce. This study focuses on a new crop-type, chickpeas, in Western Australia to gather such evidence. The empirical models developed are based on a theoretical framework that conceptualizes adoption as a dynamic decision process involving information acquisition and learning-by-doing by growers who vary in their managerial abilities, risk preferences, and their perceptions of the profitability and riskiness of the innovation. Learning encompasses improvements in skill as well as reductions in uncertainty. An annual face-to-face survey of over 100 farmers was conducted over 3 years, eliciting the farmers' risk attitudes and their subjective distributions of yields and prices. Two limited dependent variable models, Tobit and Probit, are used to estimate the empirical model. There is a high degree of goodness-of-fit for both models. The study provides strong empirical support for the primarily economic character of the adoption decision, and highlight the importance of economic risk in the process. The two risk-related factors with greatest impact on the adoption decision were risk aversion and relative riskiness of the innovation. Risk aversion tended to reduce adoption, and to do so to a greater extent as relative riskiness and scale increased. Results also reveal the key role that trialing of the innovation plays in adoption. Copyright 2005 International Association of Agricultural Economics.

Suggested Citation

  • Amir K. Abadi Ghadim & David J. Pannell & Michael P. Burton, 2005. "Risk, uncertainty, and learning in adoption of a crop innovation," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 1-9, July.
  • Handle: RePEc:bla:agecon:v:33:y:2005:i:1:p:1-9

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    References listed on IDEAS

    1. Hayenga, Marvin L. & Rhodes, V. James & Grimes, Glenn & Lawrence, John D., 1996. "Vertical Coordination in Hog Production," Staff General Research Papers Archive 10561, Iowa State University, Department of Economics.
    2. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economics Reports 33971, United States Department of Agriculture, Economic Research Service.
    3. Mishra, Ashok K. & El-Osta, Hisham S. & Morehart, Mitchell J. & Johnson, James D. & Hopkins, Jeffrey W., 2002. "Income, Wealth, And The Economic Well-Being Of Farm Households," Agricultural Economics Reports 33967, United States Department of Agriculture, Economic Research Service.
    4. Hayenga, Marvin L., 2000. "Meat Packer Vertical Integration and Contract Linkages in the Beef and Pork Industries: An Economic Perspective," Staff General Research Papers Archive 10564, Iowa State University, Department of Economics.
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