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Endogenous Technology Adoption Under Production Risk: Theory and Application to Irrigation Technology

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  • Celine Nauges
  • Phoebe Koundouri
  • Vangelis Tzouvelekas

    (Department of Economics, University of Crete, Greece)

Abstract

The main objective of this paper is to present a theoretical framework that conceptualizes technology adoption as a decision process involving information acquisition by farmers who face yield uncertainty and vary in their risk preferences. This is done by integrating the microeconomic foundations used to analyze production uncertainty at the farm level with the traditional technological adoption models. First we follow the approach of Antle (1987) based on higher-order moments of profit, which enables flexible estimation of the stochastic technology without ad hoc specification of risk preferences. Then individual risk preferences are derived, which are then used to explain farmer’s decision to adopt modern water saving technologies. The proposed model is applied to a randomly selected sample of 265 farms located in Crete, Greece. Results show that risk preferences affect the probability of adoption and provide evidence that farmers invest in new technologies as a means of hedging against input related production risk.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Celine Nauges & Phoebe Koundouri & Vangelis Tzouvelekas, 2004. "Endogenous Technology Adoption Under Production Risk: Theory and Application to Irrigation Technology," Working Papers 0411, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:0411
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    Cited by:

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    2. Rossi, Fabiana Ribeiro & Souza Filho, Hildo Meirelles de & Carrer, Marcelo Jose, 2016. "Irrigation adoption by orange producers of the state of São Paulo-Brazil: determinants and barriers," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230121, Southern Agricultural Economics Association.
    3. Wided Mattoussi & Foued Mattoussi, 2010. "Adoption of Modern Irrigation Technologies in the Presence of Water Theft and Corruption: Evidence from Public Irrigated Areas in Medjez El Bab," Working Papers 570, Economic Research Forum, revised 11 Jan 2010.
    4. Kassie, Menale & Pender, John & Yesuf, Mahmud & Köhln, Gunnar & Mulugeta, Elias, 2008. "The Role of Soil Conservation on Mean Crop Yield and Variance of Yield: Evidence from the Ethiopian Highlands," RFF Working Paper Series dp-08-08-efd, Resources for the Future.
    5. Phoebe Koundouri, 2004. "Current Issues in the Economics of Groundwater Resource Management," Journal of Economic Surveys, Wiley Blackwell, vol. 18(5), pages 703-740, December.
    6. Javad Torkamani & Shahrokh Shajari, 2008. "Adoption of New Irrigation Technology Under Production Risk," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(2), pages 229-237, February.
    7. Mohamed Ayadi & Wided Mattoussi, 2014. "From Productivity to Exporting or Vice Versa? Evidence from Tunisian Manufacturing Sector," Working Papers 852, Economic Research Forum, revised Nov 2014.
    8. 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.
    9. Mohamed Ayadi & Wided Matoussi, 2014. "Working Paper - 214 - From Productivity to Exporting or Vice Versa Evidence from Tunisian Manufacturing Sector," Working Paper Series 2150, African Development Bank.
    10. Luter, Ryan L. & Norwood, F. Bailey & Massey, Raymond E., 2004. "Substitutability of Livestock Manure for Chemical Fertilizer: A Contingent Valuation Analysis of Crop Producers," 2004 Annual meeting, August 1-4, Denver, CO 19914, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    More about this item

    Keywords

    Risk Attitudes; Technology Adoption; Stochastic Agricultural Production; Moments Based Estimation;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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