Scandinavian Working Papers in Economics

CLTS Working Papers,
Norwegian University of Life Sciences, Centre for Land Tenure Studies

No 8/17: Probability Weighting and Input Use Intensity in a State-Contingent Framework

Stein T. Holden () and John Quiggin
Additional contact information
Stein T. Holden: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway
John Quiggin: School of Economics, University of Queensland, Postal: Brisbane St Lucia, QLD 4072, Australia

Abstract: Climate risk represents an increasing threat to poor and vulnerable farmers in drought-prone areas of Africa. This study assesses the fertilizer adoption responses of food insecure farmers in Malawi, where Drought Tolerant (DT) maize was recently introduced. A field experiment, eliciting risk attitudes of farmers, is combined with a detailed farm household survey. A state-contingent production model with rank-dependent utility preferences is estimated. Over-weighting of small probabilities was associated with less use of fertilizer on all maize types and particularly so on the more risky improved maize types.

Keywords: Climate risk; state-contingent production; subjective probability weighting; technology adoption; adaptation; maize; Drought Tolerant maize; fertilizer use

JEL-codes: C93; D03; O33; Q12; Q18

40 pages, First version: May 5, 2017. Revised: October 21, 2019.

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