Journal Article

Selection and Comparative Advantage in Technology Adoption

Suri, Tavneet

2011

Overview

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.

• Publisher: Blackwell Publishing Ltd,Econometric Society,Wiley-Blackwell
• Subject: 1997-2004 / Adoption of innovations / Adoption rates / Agrarproduktion / Agrartechnik / Applications / Comparative advantage / Corn / Correlation analysis / Crop economics / Crops / Decision making / Developing countries / Development economics / Distribution theory / Economic growth / Equilibrium models / Exact sciences and technology / Farmers / Fertilizers / Growth models / Growth rates / Heterogeneity / Hybrid seeds / Infrastructure / Innovation adoption / Insurance, economics, finance / Kenia / Labor costs / Landwirtschaftliche Entwicklung / LDCs / Mathematics / New technology / Parametric inference / Probability and statistics / Probability theory and stochastic processes / Profits / Sciences and techniques of general use / Statistics / Studies / Technischer Fortschritt / Technological change / Technologiewahl / Technology / Technology adoption / Technology assessment / Working papers