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Risk Implications of Farm Technology Adoption in the Ethiopian Highlands

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  • Yesuf, Mahmud
  • Kassie, Menale
  • Köhlin, Gunnar

Abstract

In countries where insurance and credit markets are thin or missing, production and consumption risks play a critical role in the choice and use of production inputs and adoption of new farm technologies. In this paper, we investigated impacts of chemical fertilizer and soil and water conservation technologies adoption on production risks, using a moment-based approach and two years of cross-sectional data. A pseudo-fixed-effect model was estimated to generate first, second, and third moments of farm production. Our results revealed that fertilizer adoption reduces yield variability, but increases the risk of crop failure. However, adopting soil and water conservation technology has no impact on yield variability, but reduces the downside risk of crop failure. The results underscore that the risk implications of farm technology adoption vary by technology type. Furthermore, policies that promote adoption of fertilizers should be complemented by desirable instruments that hedge against downside risk. In that respect, if properly implemented, the safety net program and the weather insurance programs currently piloted in some parts of Ethiopia are actions in the right direction.

Suggested Citation

  • Yesuf, Mahmud & Kassie, Menale & Köhlin, Gunnar, 2009. "Risk Implications of Farm Technology Adoption in the Ethiopian Highlands," Discussion Papers dp-09-13-efd, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-09-13-efd
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    File URL: http://www.rff.org/RFF/documents/EfD-DP-09-13.pdf
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    References listed on IDEAS

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    1. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 219-255.
    2. Dercon, Stefan & Christiaensen, Luc, 2011. "Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia," Journal of Development Economics, Elsevier, vol. 96(2), pages 159-173, November.
    3. Kassie, Menale & Yesuf, Mahmud & Köhlin, Gunnar, 2008. "The Role of Production Risk in Sustainable Land-Management Technology Adoption in the Ethiopian Highlands," Discussion Papers dp-08-15-efd, Resources For the Future.
    4. Mahmud Yesuf & Randall A. Bluffstone, 2009. "Poverty, Risk Aversion, and Path Dependence in Low-Income Countries: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1022-1037.
    5. Ben Groom & Phoebe Koundouri & Celine Nauges & Alban Thomas, 2008. "The story of the moment: risk averse cypriot farmers respond to drought management," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 315-326.
    6. Howard D. Leathers & John C. Quiggin, 1991. "Interactions between Agricultural and Resource Policy: The Importance of Attitudes toward Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 757-764.
    7. H. Alan Love & Steven T. Buccola, 1991. "Joint Risk Preference-Technology Estimation with a Primal System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 765-774.
    8. Phoebe Koundouri & Céline Nauges & Vangelis Tzouvelekas, 2006. "Technology Adoption under Production Uncertainty: Theory and Application to Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 657-670.
    9. Bardhan, Pranab K., 1977. "Variations in forms of tenancy in a peasant economy," Journal of Development Economics, Elsevier, vol. 4(2), pages 105-118, June.
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    Cited by:

    1. Gharad Bryan & Shyamal Chowdhury & A. Mushfiq Mobarak, 2011. "Seasonal Migration and Risk Aversion," Working Papers id:4650, eSocialSciences.

    More about this item

    Keywords

    production risks; farm technology; moment-based approach; Ethiopia;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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