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Ambiguity Aversion as a Predictor of Technology Choice: Experimental Evidence from Peru

Author

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  • Jim Engle-Warnick
  • Javier Escobal
  • Sonia Laszlo

Abstract

The lack of adoption of new farming technologies despite known benefis is a well-documented phenomenon in development economics. In addition to a number of market constraints, risk aversion predominates the discussion of behavioral determinants of technology adoption. We hypothesize that ambiguity aversion may also be a determinant, since farmers may have less information about the distribution of yield outcomes from new technologies compared with traditional technologies. We test this hypothesis with a laboratory experiment in the field in which we measure risk and ambiguity preferences. We combine our experiment with a survey in which we collect information on farm decisions and identify market constraints. We find that ambiguity aversion does indeed predict actual technology choices on the farm. Un phénomène bien documenté en économie du développement est le nombre peu élevé d'agriculteurs qui décident d'adopter de nouvelles technologies en agriculture, malgré leurs avantages connus. En plus des nombreuses contraintes imposées par le marché, l'aversion au risque prédomine la discussion sur les déterminants de l'adoption de nouvelles technologies. Nous émettons l'hypothèse que l'aversion à l'ambiguïté pourrait aussi être un déterminant puisqu'il est possible que les agriculteurs aient moins d'information sur la distribution du rendement des nouvelles technologies que sur celle des technologies traditionnelles. Nous testons la validité de cette hypothèse avec une expérience en laboratoire sur le terrain où nous mesurons les préférences vis-à-vis du risque et de l'ambiguïté. Nous combinons notre expérience à un sondage portant sur les décisions prises en matière d'agriculture et identifiant les contraintes du marché. Nous constatons qu'effectivement, l'aversion à l'ambiguïté dicte les choix technologiques réels relatifs à la ferme.

Suggested Citation

  • Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2007. "Ambiguity Aversion as a Predictor of Technology Choice: Experimental Evidence from Peru," CIRANO Working Papers 2007s-01, CIRANO.
  • Handle: RePEc:cir:cirwor:2007s-01
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    References listed on IDEAS

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    Cited by:

    1. Galarza, Francisco, 2009. "Choices under Risk in Rural Peru," MPRA Paper 17708, University Library of Munich, Germany.
    2. Alpizar, Francisco & Carlsson, Fredrik & Naranjo, Maria, 2009. "The effect of risk, ambiguity, and coordination on farmers’ adaptation to climate change: A framed field experiment," Working Papers in Economics 382, University of Gothenburg, Department of Economics.
    3. Brick, Kerri & Visser, Martine, 2015. "Risk preferences, technology adoption and insurance uptake: A framed experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 383-396.
    4. Moser, Stefan & Mußhoff, Oliver, 2015. "Comparing the use of risk-influencing production inputs and experimentally measured risk attitude: Do decisions of Indonesian small-scale rubber farmers match?," EFForTS Discussion Paper Series 14, University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)".
    5. Jim Engle-Warnick & Sonia Laszlo, 2017. "Learning-by-doing in an ambiguous environment," Journal of Risk and Uncertainty, Springer, vol. 55(1), pages 71-94, August.
    6. Alpizar, Francisco & Carlsson, Fredrik & Naranjo, Maria A., 2011. "The effect of ambiguous risk, and coordination on farmers' adaptation to climate change — A framed field experiment," Ecological Economics, Elsevier, vol. 70(12), pages 2317-2326.
    7. Elaine M. Liu, 2008. "Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China," Working Papers 1064, Princeton University, Department of Economics, Industrial Relations Section..
    8. Juan Camilo Cardenas & Jeffrey Carpenter, 2008. "Behavioural Development Economics: Lessons from Field Labs in the Developing World," Journal of Development Studies, Taylor & Francis Journals, vol. 44(3), pages 311-338.
    9. Elizabeth Potamites & Bei Zhang, 2012. "Heterogeneous ambiguity attitudes: a field experiment among small-scale stock investors in China," Review of Economic Design, Springer;Society for Economic Design, vol. 16(2), pages 193-213, September.
    10. Peterson, Hikaru & Yamaura, Koichi, 2014. "Ambiguity Aversion and Preferences for Food Origin Post Fukushima Nuclear Disaster," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170552, Agricultural and Applied Economics Association.
    11. Ward, Patrick S. & Singh, Vartika, 2013. "Risk and Ambiguity Preferences and the Adoption of New Agricultural Technologies: Evidence from Field Experiments in Rural India," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150794, Agricultural and Applied Economics Association.
    12. Elaine Meichen Liu, 2008. "Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China," Working Papers 1064, Princeton University, Department of Economics, Industrial Relations Section..
    13. repec:wsi:ccexxx:v:03:y:2012:i:02:n:s2010007812500078 is not listed on IDEAS
    14. Patrick S. Ward & Vartika Singh, 2015. "Using Field Experiments to Elicit Risk and Ambiguity Preferences: Behavioural Factors and the Adoption of New Agricultural Technologies in Rural India," Journal of Development Studies, Taylor & Francis Journals, vol. 51(6), pages 707-724, June.
    15. Alpízar, Francisco & Carlsson, Fredrik & Naranjo, Maria A., 2010. "Farmers’ Adaptation to Climate Change: A Framed Field Experiment," Discussion Papers dp-09-18-rev-efd, Resources For the Future.
    16. Verschoor, Arjan & D’Exelle, Ben & Perez-Viana, Borja, 2016. "Lab and life: Does risky choice behaviour observed in experiments reflect that in the real world?," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 134-148.
    17. Ross, Nicholas & Santos, Paulo & Capon, Timothy, 2012. "Risk, ambiguity and the adoption of new technologies: experimental evidence from a developing economy," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126492, International Association of Agricultural Economists.
    18. Hurley, Terrance M., 2010. "A review of agricultural production risk in the developing world," Working Papers 188476, HarvestChoice.
    19. Juan Camilo Cárdenas, 2009. "Experiments in Environment and Development," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 157-182, September.
    20. Sheremenko, Ganna & Magnan, Nicholas, 2015. "Gender-specific Risk Preferences and Fertilizer Use in Kenyan Farming Households," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205766, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    experimental economics; risk measurement instruments; risk preferences; rural development; technology choice; choix technologiques; développement rural; économie expérimentale; instruments de mesure du risque; préférences vis-à-vis du risque;

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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