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Field: Social Sciences
Session Topic:
Acceptance of New Technologies
Speaker:
Takashi Kurosaki, Hitotsubashi University
Title: Producers' Adoption of New Technologies in Developing Countries
1. Introduction
Technical change is regarded as one of the engines of growth in development economics. A number of
macroeconomic empirical studies have shown that the technical change has indeed contributed to
economic growth. For instance, the US economy grew at an annual rate of 2.7% in real GDP per capita
during 1929-66, of which 78% can be attributed to technical change, while the Japanese economy
grew at an annual rate of 8.2% during 1958-70, of which 54% can be attributed to technical change
(Hayami and Godo 2005, Table 5.2). However, the macro growth rate has been below the level
required for a rapid poverty reduction at the global level; at the microeconomic level, we often observe
instances where seemingly-superior new technologies have not been accepted by producers so that the
adoption rate of such technologies has been less than expected. In other words, there exists a huge
technology gap in developing countries between the potential and the actual level of productivity. This
gap is a potential source of growth, if we can correctly understand the reason for low adoption.
Applying the modeling approach in development microeconometrics to semi-arid tropics of rural
South Asia, the author explains this observation not as an irrational behavior of poor and illiterate
producers, but as an outcome of rational response of poor and risk-averse producers to incomplete
markets and asymmetric information.
2. Analytical Framework: Risk, asymmetric information, and households' technology adoption
in development microeconomics
Based on the theoretical framework of Kurosaki (2001), the analytical framework of this paper
maintains a hypothesis that a firm/farm in a developing country is rational and adopts a new
technology if it improves the welfare/utility of the firm/farm, but it faces several constraints such as
high risk in production and marketing, less availability of insurance services and low self-insurance
ability due to low income, and high degree of asymmetric information regarding the technology and
markets. A related literature can be found in Evenson and Westphal (1995) and Sunding and Zilberman
(2001).
3. Case Studies on Poverty and Households' Risk-Coping Measures in South Asia
Main example is taken from Kurosaki and Fafchamps (2002). This study examines how Pakistani
farmers' production mix (technology adoption) is different from the profit maximizing pattern under
the latest technology, given negative correlation between crop and livestock profits. Structural
estimation of risk and consumption preferences based on a non-separable agricultural household
model yields the following results:
(1) Farmers' technology choice is consistent with a risk-averse behavior, with respect to both total
income and consumption prices.
(2) The extent of risk aversion varies systematically among farmers. Especially, livestock reduce
risk aversion (households with more liquid assets and more access to credit are better able to bear
risk).
(3) Our model of technology adoption by a risk-averse farmer with respect to both total income and
consumption prices performed much better than alternative models.
(4) Income loss due to risk consideration is simulated at 9.4% of the total household income
(higher for land-poor households), indicating social inefficiency due to less development of credit
and insurance markets.
Extension of this framework is applied to fodder crop choice in India (Kurosaki 2005), labor portfolio
in India (Ito and Kurosaki 2006), and employment institutions in Myanmar (Kurosaki 2006). All these
cases supported the view that producers' technology choice is affected by risk aversion and
asymmetric information.
4. Conclusion
This paper investigates the underlying reasons why seemingly-superior new technologies have not
been accepted by producers so that the adoption rate of such technologies has been low. The author's
evidence from semi-arid tropics of rural South Asia explains this observation not as an irrational
behavior of poor and illiterate producers, but as an outcome of rational response of poor and
risk-averse producers to incomplete markets and asymmetric information. An important implication of
this explanation is that faster economic growth and more poverty reduction is possible with the
available set of technologies if the constraints of market incompleteness and information asymmetry
are reduced (e.g., through the provision of more efficient credit access to the poor by micro finance
institutions). Another implications is that a new technology should take into consideration these
constraints faced by producers in developing countries (e.g., developing a sorghum variety that meets
farmers' demand both for fodder and grains).
References
Evenson, R. E., and L E. Westphal (1995) ``Technological Change and Technology Strategy," in
Behrmand and Srinivasan (eds.) Behrman, Jere, and Srinivasan, T. N. (eds.), Handbook of
Development Economics, Volume IIIA. Amsterdam: North Holland, pp.2209-2299.
Hayami, Y. and Y. Godo (2005) Development Economics: From the Poverty to the Wealth of Nations.
Third Edition. New York: Oxford University Press.
Ito, T. and T. Kurosaki (2006) "Weather Risk and the Off-Farm Labor Supply of Agricultural
Households in India," contributed paper at the International Association of Agricultural
Economists Conference, Gold Coast, Australia, August 12-18, 2006.
Kurosaki, T. (2001) Kaihatsu no Mikuro Keizaigaku: Riron to Ouyou (Development Microeconomics:
Theory and Application), Tokyo: Iwanami Shoten (in Japanese).
----- (2005) "Dynamics of Livelihood Structure and Assets in Village India, 1975-2004: Literature
Survey and Research Agendas." In Seiro Ito (ed.), Agricultural Production, Household
Behavior, and Child Labor in Andhra Pradesh. Joint Research Program Series No. 135, IDE,
March 2005: 53-104.
----- (2006) "Labor Contracts, Incentives, and Food Security in Rural Myanmar," COE Discussion
Paper no.134, Institute of Economic Research, Hitotsubashi University, Tokyo. January
2006.
Kurosaki, T. and M. Fafchamps (2002) "Insurance Market Efficiency and Crop Choices in Pakistan."
Journal of Development Economics, vol.67, no.2.
Sunding, D. and D. Zilberman (2001) "The Agricultural Innovation Process: Research and Technology
Adoption in a Changing Agricultural Sector," in B.L. Gardner and G.C. Rausser (eds.)
Handbook of Agricultural Economics, Volume 1. Amsterdam: Elsevier, North-Holland.
pp.207-261.