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The Adoption and Diffusion of GM Crops in USA: A Real Option Approach

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Abstract

The paper aims at modelling adoption and diffusion decisions of farmers towards genetically modified crops under a real option framework. Modern GM crops help farmers to resolve two main sources of uncertainty: output uncertainty and input uncertainty. Those crops represent a revolutionary form of farming compared to the technology adoption studied in the literature in the late ‘70s-early ‘80s. The paper develops a theoretical model of adoption and diffusion of new GM crops under uncertainty and irreversibility. We test our theoretical predictions using data from 2000 to 2008 of a panel dataset constructed for 13 states of USA involved into the production of 4 different GM crop. These conclusions may appear to contradict the general perception of a delayed penetration for the GM crops, whose success seems to be retarded by lack of information, mistrust and an exaggerated perception of risks. GM crops tend to be invasive, in that their short term profitability is so high as compared with the investment needed, that once the hump of uncertainty is overcome, they operate a veritable takeover of agriculture

Suggested Citation

  • Sara Savastano & Pasquale Lucio Scandizzo, 2010. "The Adoption and Diffusion of GM Crops in USA: A Real Option Approach," CEIS Research Paper 169, Tor Vergata University, CEIS, revised 20 Jul 2010.
  • Handle: RePEc:rtv:ceisrp:169
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    6. 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.
    7. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-243, May.
    8. Reimund, Donn A. & Martin, J. Rod & Moore, Charles V., 1981. "Structural Change in Agriculture: The Experience for Broilers, Fed Cattle, and Processing Vegetables," Technical Bulletins 157701, United States Department of Agriculture, Economic Research Service.
    9. Kaliba, Aloyce R. M. & Featherstone, Allen M. & Norman, David W., 1997. "A stall-feeding management for improved cattle in semiarid central Tanzania: factors influencing adoption," Agricultural Economics, Blackwell, vol. 17(2-3), pages 133-146, December.
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    Cited by:

    1. Mary Thuo & Alexandra Bell & Boris Bravo-Ureta & Michée Lachaud & David Okello & Evelyn Okoko & Nelson Kidula & Carl Deom & Naveen Puppala, 2014. "Effects of social network factors on information acquisition and adoption of improved groundnut varieties: the case of Uganda and Kenya," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 31(3), pages 339-353, September.
    2. Fernandez-Cornejo, Jorge & Wechsler, Seth James, 2012. "Fifteen Years Later: Examining the Adoption of Bt Corn Varieties by U.S. Farmers," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124257, Agricultural and Applied Economics Association.
    3. Wesseler, Justus & Smyth, Stuart J. & Scatasta, Sara, 2010. "Overview of special issue from the 2009 ICABR Conference," MPRA Paper 25601, University Library of Munich, Germany.
    4. Fausti, Scott W. & Van der Sluis, Evert & Qasmi, Bashir A. & Lundgren, Jonathan, 2014. "The Effect of Biotechnology and Biofuels on U.S. Corn Belt Cropping Systems," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162468, Southern Agricultural Economics Association.
    5. Fernandez-Cornejo, Jorge & Wechsler, Seth James, 2011. "Revisiting the Impact of Bt Corn Adoption by U.S. Farmers," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103327, Agricultural and Applied Economics Association.

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    Keywords

    Adoption; Diffusion; Uncertainty; Irreversibility; Real Option;

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