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Selection and Comparative Advantage in Technology Adoption

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  • Tavneet Suri

Abstract

This paper investigates an empirical puzzle in technology adoption for developing countries: the low adoption rates of technologies like hybrid maize that increase average farm profits dramatically. I offer a simple explanation for this: benefits and costs of technologies are heterogeneous, so that farmers with low net returns do not adopt the technology. I examine this hypothesis by estimating a correlated random coefficient model of yields and the corresponding distribution of returns to hybrid maize. This distribution indicates that the group of farmers with the highest estimated gross returns does not use hybrid, but their returns are correlated with high costs of acquiring the technology (due to poor infrastructure). Another group of farmers has lower returns and adopts, while the marginal farmers have zero returns and switch in and out of use over the sample period. Overall, adoption decisions appear to be rational and well explained by (observed and unobserved) variation in heterogeneous net benefits to the technology.

Suggested Citation

  • Tavneet Suri, 2009. "Selection and Comparative Advantage in Technology Adoption," NBER Working Papers 15346, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15346
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    Cited by:

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    3. B Kelsey Jack, "undated". "Market Inefficiencies and the Adoption of Agricultural Technologies in Developing Countries," CID Working Papers 50, Center for International Development at Harvard University.
    4. Bold, Tessa & Kaizzi, Kayuki & Svensson, Jakob & Yanagizawa-Drott, David, 2015. "Low Quality, Low Returns, Low Adoption: Evidence from the Market for Fertilizer and Hybrid Seed in Uganda," CEPR Discussion Papers 10743, C.E.P.R. Discussion Papers.
    5. Bonjean, Isabelle, 2018. "Heterogeneous Incentives to Innovation Adoption: the Price Effect on Segmented Market," Working Papers 279295, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    6. Andrew D. Foster & Mark R. Rosenzweig, 2010. "Microeconomics of Technology Adoption," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 395-424, September.
    7. Dethier, Jean-Jacques & Effenberger, Alexandra, 2012. "Agriculture and development: A brief review of the literature," Economic Systems, Elsevier, vol. 36(2), pages 175-205.
    8. Shawn Cole & Xavier Giné & James Vickery, 2017. "How Does Risk Management Influence Production Decisions? Evidence from a Field Experiment," Review of Financial Studies, Society for Financial Studies, vol. 30(6), pages 1935-1970.
    9. Gitonga, Zachary M. & De Groote, Hugo, 2016. "Role of hybrid maize adoption on food security in Kenya: an application of two-step generalized method of moments (gmm2s)," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246315, African Association of Agricultural Economists (AAAE).

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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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