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Selection and Comparative Advantage in Technology Adoption

  • Tavneet Suri
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    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.

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    File URL: http://www.nber.org/papers/w15346.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15346.

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    Date of creation: Sep 2009
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    Publication status: published as “Selection and Comparative Advantage in Technology Adoption”, Econometrica., 79 (1), pp. 159-209, January 2011.
    Handle: RePEc:nbr:nberwo:15346
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