Association for Public Policy Analysis & Management

Technological innovation has always been associated with economic development. More particularly, advances in agricultural technologies have been considered a major factor in improving living standards of rural populations. Given the much advocated benefits from new agricultural technologies, the delay in adoption of proven technologies has always puzzled economists.  In response, an extensive literature has attempted to explain why farmers do not adopt or delay adoption of new technology. This paper investigates how perceived uncertainty about technology effectiveness, acts as a major impediment in adoption of proven technologies in India. Farmers’ perceived uncertainty allows individual risk preferences to play a heightened role in technology adoption, making the risk averse farmers adopt risk reducing technologies and risk loving farmer adopt risk increasing technology. Since risk preferences are not easily assessed through standard household surveys this study uses experimental methods to elicit risk attitudes and uses that measure to explain the adoption patterns of three climate smart technologies by farmers. 

This study was conducted in eastern and northern India and focused on rice–wheat cropping (RW) systems. Such systems make up 26% of total cereal production and 60% of total calorie intake (Gupta et al., 2003). The area under the RW system is relatively fixed and the productivity and sustainability of the system are threatened because of the inefficiency of current production practices, shortages of resources such as water and labor, and socioeconomic changes. The limited land area, water resources, and the increasing weather variability caused by climatic factors are making it more difficult to meet the increasing demand for food from a burgeoning population. In response to this crisis, the national and international agricultural research community has introduced a host of climate smart technologies for sustainable intensification. These technologies are considered essential for future agriculture, as they help in address climate change adaptation and mitigation by both increasing productivity and reducing Green House Gas (GHG) emissions.  This paper analyzes the adoption of three such climate smart technologies – Laser Land Leveling, Zero Tillage and Direct Seeding of Rice, which are considered risk reducing my CGIAR.

Though most studies use Expected Utility Theory to explain technology adoption we believe there are several reasons why Prospect theory is a better fit in the context of the technology adoption studied here. First, most farmers are poor in our study area and they might be more sensitive to losses than to gains, so loss aversion may well play a significant role. Second, farmers who are economically situated around the poverty line might the probabilities around poverty line. That is, farmers who have just moved out of the poverty trap, might be very cautious about investing in a new uncertain technology because one year of lower yields might throw them back into poverty.  Third, if we accept the concept of a target income (i.e., a minimum income that farmer trying to reach), then such farmers should be more sensitive to losses than to gains when they are close to the target.