IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Production Risk and Farm Technology Adoption in Rain-Fed, Semi-Arid Lands of Kenya

  • Juma, Maurice
  • Nyangena, Wilfred
  • Yesuf, Mahmud
Registered author(s):

    This study provides empirical evidence on the effects of production risk on farm technology adoption among small holder farmers using plot-level data collected from two semi-arid districts in Kenya, Machakos, and Taita Taveta. We employed a two-stage approach to estimate a production function, and computed the mean and the production risk factors (both variance and skewness) from a production function using Antle’s (1983, 1987) moment-based approach. We then used these moment estimates, together with other household and plot-level characteristics in a pseudo-fixed effect probit model to determine the effects of production risk and farm and household-level variables on households’ decisions to adopt different kinds of farm technologies. In our estimations, by means of Mundlak’s approach (1978), we controlled for unobserved heterogeneities that could potentially be correlated to some of the observed explanatory variables and otherwise bias our estimates. We also addressed the potential endogeneity issues in our estimation using a two-stage IV estimation procedure. Our results showed that, among others, yield variability and the risk of crop failures indeed affect technology adoption decisions in low-income, rain-fed agriculture. But, the direction and magnitude of effects depend on the farm technology under consideration. The results explain why poor farm households in rain-fed and risky production environments are reluctant to adopt new farm technologies with potential production gain because, at the same time, they involve enormous down-side risks. This result underscores the fact that productivity gains are necessary, but not sufficient, conditions to attract farmers to adopt new technologies and agricultural innovations. Risk implications matter. Technology- and location-specific production-risk coping strategies need to be designed to successfully upscale profitable farm technologies across poor farm households in low income countries.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Resources For the Future in its series Discussion Papers with number dp-09-22-efd.

    in new window

    Date of creation: 15 Oct 2090
    Date of revision:
    Handle: RePEc:rff:dpaper:dp-09-22-efd
    Contact details of provider: Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Kim, Kwansoo & Chavas, Jean-Paul, 2003. "Technological change and risk management: an application to the economics of corn production," Agricultural Economics, Blackwell, vol. 29(2), pages 125-142, October.
    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. Shively, Gerald E., 1997. "Consumption risk, farm characteristics, and soil conservation adoption among low-income farmers in the Philippines," Agricultural Economics, Blackwell, vol. 17(2-3), pages 165-177, December.
    4. 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.
    5. Stefan Dercon, 2003. "Growth and Shocks: evidence from rural Ethiopia," Economics Series Working Papers WPS/2003-12, University of Oxford, Department of Economics.
    6. Doss, Cheryl R., 2003. "Understanding Farm-Level Technology Adoption: Lessons Learned From Cimmyt'S Micro Surveys In Eastern Africa," Economics Working Papers 46552, CIMMYT: International Maize and Wheat Improvement Center.
    7. Eswaran, Mukesh & Kotwal, Ashok, 1990. "Implications of Credit Constraints for Risk Behaviour in Less Developed Economies," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 473-82, April.
    8. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
    9. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
    10. Mark Rosenzweig & Andrew D. Foster, . "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Home Pages _068, University of Pennsylvania.
    11. 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 255-98, January.
    12. 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.
    13. Kassie, Menale & Yesuf, Mahmud & Köhlin, Gunnar, 2009. "The Role of Production Risk in Sustainable Land-Management Technology Adoption in the Ethiopian Highlands," Working Papers in Economics 407, University of Gothenburg, Department of Economics.
    14. Shively, Gerald E., 2001. "Poverty, consumption risk, and soil conservation," Journal of Development Economics, Elsevier, vol. 65(2), pages 267-290, August.
    15. 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.
    16. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-09-22-efd. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.