Risk Preference as an Endogenous Determinant of Improved Rice Technology Adoption Decisions: Evidence from Nigeria

Improved agricultural innovation is a panacea to economic development yet the level of adoption of the available improved agricultural technology is mixed in most developing countries. While attempts have been made to identify extrinsic factors in adoption decisions, less attention is given to the intrinsic variables. This study examines the roles of farmers‟ risk preferences and spatial dependence in the decisions to adopt higher yielding rice varieties. We utilize experimental and survey data from Nigeria and estimated instrumental probit model in two stages: risk model first, and adoption decisions model second. We account for the spatial heterogeneity in adoption and found the spatial lags of the risk attitude variables as significant instruments for unobserved variables like environmental factors. More importantly, risk preference is a significant endogenous determinant of adoption decisions. Correlation between spatial dependence and risk preference is an indication of the existence of social interaction and learning effects suggesting the diffusion of HYV may be enhanced through farmers‟ neighbours, because social interaction is an effective tool for information dissemination in the rural areas. Specific attention should not only be given to farmers‟ individual factors but also the group attributes like spatial aspects in decision making.