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Money Matters: The Role of Yields and Profits in Agricultural Technology Adoption

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  • Jeffrey D Michler
  • Emilia Tjernström
  • Simone Verkaart
  • Kai Mausch

Abstract

Despite the growing attention to technology adoption in the economics literature, knowledge gaps remain regarding why some valuable technologies are rapidly adopted, while others are not. This paper contributes to our understanding of agricultural technology adoption by showing that a focus on yield gains may, in some contexts, be misguided. We study a technology in Ethiopia that has no impact on yields, but that has nonetheless been widely adopted. Using three waves of panel data, we estimate a correlated random coefficient model and calculate the returns to improved chickpea in terms of yields, costs, and profits. We find that farmers’ comparative advantage does not play a significant role in their adoption decisions and hypothesize that this is due to the overall high economic returns to adoption, despite the limited yield impacts of the technology. Our results suggest economic measures of returns may be more relevant than increases in yields in explaining technology adoption decisions.

Suggested Citation

  • Jeffrey D Michler & Emilia Tjernström & Simone Verkaart & Kai Mausch, 2019. "Money Matters: The Role of Yields and Profits in Agricultural Technology Adoption," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(3), pages 710-731.
    • Handle: RePEc:oup:ajagec:v:101:y:2019:i:3:p:710-731.
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    File URL: http://hdl.handle.net/10.1093/ajae/aay050
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    Cited by:

    1. Kosmowski, Frederic & Chamberlin, Jordan & Ayalew, Hailemariam & Sida, Tesfaye & Abay, Kibrom & Craufurd, Peter, 2021. "How accurate are yield estimates from crop cuts? Evidence from smallholder maize farms in Ethiopia," Food Policy, Elsevier, vol. 102(C).
    2. Rick S. Llewellyn & Brendan Brown, 2020. "Predicting Adoption of Innovations by Farmers: What is Different in Smallholder Agriculture?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(1), pages 100-112, March.
    3. Jérémie Gignoux & Karen Macours & Daniel Stein & Kelsey Wright, 2023. "Input subsidies, credit constraints, and expectations of future transfers: Evidence from Haiti," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(3), pages 809-835, May.
    4. Ifft, Jennifer E. & Yang, Youwei, 2020. "Horses vs. Tractors? Old Order Amish Population Growth and New York Farmland Markets," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304565, Agricultural and Applied Economics Association.
    5. Shimelis Araya Geda & Rainer Kühl, 2021. "Exploring Smallholder Farmers’ Preferences for Climate-Smart Seed Innovations: Empirical Evidence from Southern Ethiopia," Sustainability, MDPI, vol. 13(5), pages 1-17, March.
    6. Chowdhury, Shyamal & Smits, Joeri & Sun, Qigang, 2020. "Contract structure, time preference, and technology adoption," GLO Discussion Paper Series 633, Global Labor Organization (GLO).
    7. Chowdhury, Shyamal & Satish, Varun & Sulaiman, Munshi & Sun, Yi, 2021. "Sooner Rather Than Later: Social Networks and Technology Adoption," IZA Discussion Papers 14307, Institute of Labor Economics (IZA).
    8. Jared Hutchins & Brent Hueth & Guilherme Rosa, 2019. "Quantifying Heterogeneous Returns to Genetic Selection: Evidence from Wisconsin Dairies," NBER Chapters, in: Economics of Research and Innovation in Agriculture, pages 81-105, National Bureau of Economic Research, Inc.
    9. Aminou Arouna & Jeffrey D. Michler & Wilfried G. Yergo & Kazuki Saito, 2021. "One Size Fits All? Experimental Evidence on the Digital Delivery of Personalized Extension Advice in Nigeria," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 596-619, March.
    10. Kibrom A. Abay & Tesfamicheal Wossen & Jordan Chamberlin, 2023. "Mismeasurement and efficiency estimates: Evidence from smallholder survey data in Africa," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(2), pages 413-434, June.
    11. Koolwal, Gayatri B., 2021. "Improving the measurement of rural women's employment: Global momentum and survey priorities," World Development, Elsevier, vol. 147(C).
    12. Valentin Verdier, 2020. "Average treatment effects for stayers with correlated random coefficient models of panel data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(7), pages 917-939, November.
    13. Kibrom A. Abay, 2020. "Measurement errors in agricultural data and their implications on marginal returns to modern agricultural inputs," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 323-341, May.
    14. Martin Paul Jr Tabe-Ojong & Jourdain C. Lokossou & Bisrat Gebrekidan & Hippolyte D. Affognon, 2023. "Adoption of climate-resilient groundnut varieties increases agricultural production, consumption, and smallholder commercialization in West Africa," Nature Communications, Nature, vol. 14(1), pages 1-11, December.
    15. Chowdhury, Shyamal & Satish, Varun & Sulaiman, Munshi & Sun, Yi, 2022. "Sooner rather than later: Social networks and technology adoption," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 466-482.
    16. Meressa, Abrha Megos & Navrud, Stale, 2020. "Not my cup of coffee: Farmers’ preferences for coffee variety traits – Lessons for crop breeding in the age of climate change," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 9(3), December.
    17. Martin Paul & Kai Mausch & Tesfaye B Woldeyohanes & Thomas Heckelei, 2022. "Three hurdles towards commercialisation: integrating subsistence chickpea producers in the market economy [Attrition in longitudinal household survey data]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(3), pages 668-695.
    18. Annemie Maertens & Hope Michelson & Vesall Nourani, 2021. "How Do Farmers Learn from Extension Services? Evidence from Malawi," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 569-595, March.
    19. Jourdain C. Lokossou & Hippolyte D. Affognon & Alphonse Singbo & Michel B. Vabi & Ayoni Ogunbayo & Paul Tanzubil & Alcade C. Segnon & Geoffrey Muricho & Haile Desmae & Hakeem Ajeigbe, 2022. "Welfare impacts of improved groundnut varieties adoption and food security implications in the semi-arid areas of West Africa," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 14(3), pages 709-728, June.
    20. Chowdhury, Shyamal & Smits, Joeri & Sun, Qigang, 2020. "Contract Structure, Time Preference, and Technology Adoption," IZA Discussion Papers 13590, Institute of Labor Economics (IZA).
    21. Wiredu, Alexander Nimo & Manda, Julius & Feleke, Shiferaw & Asante, Bright Owusu & Savala, Canon Engoke & Kyei-Boahen, Stephen & Manyong, Victor & Alene, Arega, 2021. "Impacts of Quality Seeds of Improved Legume Varieties on Incomes and Poverty in Mozambique: An Ordered Choice Endogenous Switching Regression Analysis," 2021 Conference, August 17-31, 2021, Virtual 315294, International Association of Agricultural Economists.
    22. Hannah Briony Thorne & Jenna Axtens & Talitha Best, 2022. "Perceptual Factors Influencing the Adoption of Innovative Tissue Culture Technology by the Australian Avocado Industry," Agriculture, MDPI, vol. 12(9), pages 1-11, August.
    23. Pieter Rutsaert & Jordan Chamberlin & Kevin Ong’are Oluoch & Victor Ochieng Kitoto & Jason Donovan, 2021. "The geography of agricultural input markets in rural Tanzania," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 13(6), pages 1379-1391, December.
    24. Islam, Md Saiful & Rahman, Mohammad Chhiddikur & Haque, Md Enamul & Rahaman, Md Shajedur & Omar, Md Imran & Sarkar, Md A R & Islam, Mohammad A, 2023. "Cultivation of Local Rice Varieties in Bangladesh: Assessing the Farm Level Determinants," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 21(1), pages 46-56.

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