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Social learning and parameter uncertainty in irreversible investments: Evidence from greenhouse adoption in northern China

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  • Wang, Honglin
  • Yu, Fan
  • Reardon, Thomas
  • Huang, Jikun
  • Rozelle, Scott

Abstract

This paper aims at an important gap in the literature, which has not modeled the effect of social learning in a real option context and examined uncertainty-reduction measures through social learning. This paper addresses the gap by modeling social learning as a way of reducing parameter uncertainty, thus facilitating technology adoption and shortening the waiting time in irreversible investments. We use household-level data on intermediate-technology greenhouse adoption in northern China to test the predictions in both a linear probability model and a duration analysis. Our empirical findings support the hypothesis. We also find that market volatility and insecure land property rights discourage adoption.

Suggested Citation

  • Wang, Honglin & Yu, Fan & Reardon, Thomas & Huang, Jikun & Rozelle, Scott, 2013. "Social learning and parameter uncertainty in irreversible investments: Evidence from greenhouse adoption in northern China," China Economic Review, Elsevier, vol. 27(C), pages 104-120.
  • Handle: RePEc:eee:chieco:v:27:y:2013:i:c:p:104-120
    DOI: 10.1016/j.chieco.2013.09.003
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    Cited by:

    1. Elisabeth SADOULET, 2016. "Review of Theories of Learning for Adopting," Working Papers P163, FERDI.
    2. Hoken, Hisatoshi & Su, Qun, 2015. "Measuring the effect of agricultural cooperatives on household income using PSM-DID : a case study of a rice-producing cooperative in China," IDE Discussion Papers 539, Institute of Developing Economies, Japan External Trade Organization(JETRO).

    More about this item

    Keywords

    Social learning; Technology adoption; Irreversible investment; Greenhouse; China;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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