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Market Imperfections and Farm Technology Adoption Decisions: A Case Study from the Highlands of Ethiopia


  • Yesuf, Mahmud
  • Köhlin, Gunnar


This paper investigates the impacts of market and institutional imperfections on technology adoption in a model that considers fertilizer use and soil conservation to be joint decisions. Controlling for plot characteristics and other factors, we found that a household’s decision to adopt fertilizer significantly and negatively depends on whether the same household adopts soil conservation. The reverse causality, however, was insignificant. We also found that outcomes of market imperfections, such as limited access to credit, plot size, risk considerations, and rates-of-time preference, were significant factors in explaining variations in farm technology adoption decisions. Relieving the existing market imperfections will most likely increase the adoption rate of farm technologies

Suggested Citation

  • Yesuf, Mahmud & Köhlin, Gunnar, 2008. "Market Imperfections and Farm Technology Adoption Decisions: A Case Study from the Highlands of Ethiopia," Discussion Papers dp-08-04-efd, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-08-04-efd

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    References listed on IDEAS

    1. Gebremedhin, Berhanu & Swinton, Scott M., 2003. "Investment in soil conservation in northern Ethiopia: the role of land tenure security and public programs," Agricultural Economics, Blackwell, vol. 29(1), pages 69-84, July.
    2. Shively, Gerald E., 1997. "Consumption risk, farm characteristics, and soil conservation adoption among low-income farmers in the Philippines," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 17(2-3), December.
    3. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-298, January.
    4. Shiferaw, Bekele & Holden, Stein, 1999. "Soil Erosion and Smallholders' Conservation Decisions in the Highlands of Ethiopia," World Development, Elsevier, vol. 27(4), pages 739-752, April.
    5. Joseph Hayes & Michael Roth & Lydia Zepeda, 1997. "Tenure Security, Investment and Productivity in Gambian Agriculture: A Generalized Probit Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 369-382.
    6. Shively, Gerald E., 2001. "Poverty, consumption risk, and soil conservation," Journal of Development Economics, Elsevier, vol. 65(2), pages 267-290, August.
    7. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
    8. Pender, John L. & Kerr, John M., 1998. "Determinants of farmers' indigenous soil and water conservation investments in semi -arid India," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 19(1-2), September.
    9. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
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    12. Stein Holden & Hailu Yohannes, 2002. "Land Redistribution, Tenure Insecurity, and Intensity of Production: A Study of Farm Households in Southern Ethiopia," Land Economics, University of Wisconsin Press, vol. 78(4), pages 573-590.
    13. Demeke, Mulat & Said, Ali & Jayne, Thomas S., 1997. "Promoting Fertilizer Use in Ethiopia: The Implications of Improving Grain Market Performance, Input Market Efficiency, and Farm Management," Food Security Collaborative Working Papers 55594, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    14. Just, Richard E. & Zilberman, David, 1988. "The effects of agricultural development policies on income distribution and technological change in agriculture," Journal of Development Economics, Elsevier, vol. 28(2), pages 193-216, March.
    15. Scherr, Sara J. & Yadav, Satya N., 1996. "Land degradation in the developing world: implications for food, agriculture, and the environment to 2020," 2020 vision discussion papers 14, International Food Policy Research Institute (IFPRI).
    16. Godoy, R. & Kirby, K. & Wilkie, D., 2001. "Tenure security, private time preference, and use of natural resources among lowland Bolivian Amerindians," Ecological Economics, Elsevier, vol. 38(1), pages 105-118, July.
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    Cited by:

    1. Mekonnen, Alemu & Damte, Abebe, 2011. "Private Trees as Household Assets and Determinants of Tree-Growing Behavior in Rural Ethiopia," Discussion Papers dp-11-14-efd, Resources For the Future.
    2. Maurice Ogada & Germano Mwabu & Diana Muchai, 2014. "Farm technology adoption in Kenya: a simultaneous estimation of inorganic fertilizer and improved maize variety adoption decisions," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 2(1), pages 1-18, December.

    More about this item


    Bivariate probit; fertilizer adoption; market imperfections; risk aversion; time preferences; soil conservation;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land


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