From field trials to farm adoption: identifying the productivity effect of on-farm technology adoption

Technology adoption is an important farm management decision and is frequently made using information that is unavailable to the researcher. Aside from their own experiences, producers often rely on extension services to inform their adoption decisions. Here, we propose a novel instrumental variable (IV) approach to identify the effect that a new technology, genetically modified (GM) corn, has on farm yield using instruments constructed from extension information. The proposed approach allows us to explore the degree to which endogeneity bias is present in the GM adoption effect on farm productivity. Candidate instruments are constructed from variety trial data to resemble information acquired by producers from university extension variety trial reports and are spatially merged with on-farm production data. We find that failure to account for the endogeneity of the adoption decision does indeed result in an upward bias in the estimated productivity gains. After correcting for this bias through our IV approach, GM corn results in large on-farm yield gains of 19.6 bushels per acre. We demonstrate that variety trial data can be used to estimate the on-farm impact of new technology, and this approach is general enough to be applied to additional contexts (i.e., technologies, crops, and/or locations).