Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 403: Market Imperfections and Farm Technology Adoption Decisions - A Case Study from the Highlands of Ethiopia
Mahmud Yesuf () and Gunnar Köhlin ()
Additional contact information
Mahmud Yesuf: Environmental Economics Policy Forum for Ethiopia, Ethiopian Development Research Institute, Postal: Blue Building/Addis Ababa Stadium, P.O. Box 2479, Addis Ababa, Ethiopia
Gunnar Köhlin: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: This paper investigates the impacts of market and institutional imperfections on technology adoption in a model that considers fertilizer use and soil conservation to be joint decisions. Controlling for plot characteristics and other factors, we found that a household’s decision to adopt fertilizer significantly and negatively depends on whether the same household adopts soil conservation. The reverse causality, however, was insignificant. We also found that outcomes of market imperfections, such as limited access to credit, plot size, risk considerations, and rates-of-time preference, were significant factors in explaining variations in farm technology adoption decisions. Relieving the existing market imperfections will most likely increase the adoption rate of farm technologies.
Keywords: Bivariate probit; fertilizer adoption; market imperfections; risk aversion; time preferences; soil conservation
25 pages, November 30, 2009
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