technology and agriculture onceptual Framework Understanding Constraints on Technology Adoption Over the last decade, billions of dollars have been invested in the development of new agricultural technologies, yet for certain proven technologies there is a profound adoption gap particularly among smallholder farmers. Increased technology adoption, broadly defined to include adoption of improved agricultural practices, crop varieties, inputs and associated products such as crop insurance, has the potential to contribute to economic growth and poverty alleviation amongst the poor. ATAI seeks to fill key gaps in the understanding of how to overcome the constraints on agricultural technology adoption. To organize the research and identify the research topics most in need of rigorous evidence, ATAI has developed a conceptual framework for considering the primary challenges to agricultural technology adoption. The conceptual framework is also available in the ATAI review paper, with full academic reference and further discussion of theories and evidence to date. Conceptual Framework: Constraints on Adoption as Market Inefficiencies In a well functioning economy where markets perfectly capture all costs and benefits, and individuals are fully informed and unconstrained, farmers will adopt a technology if they make a profit from adopting it. Of course, most economies of the world are very far from the well functioning ideal. Movement away from this ideal creates constraints on the adoption of even profitable technologies. ATAI’s research focuses on improving the ability of poor farmers to benefit from agricultural technology by seeking ways around these constraints. Successful approaches require attention to the market imperfections and other constraints that characterize the contexts in which adoption decisions are made. We have identified 7 market inefficiencies that lower expected profits from agricultural technology adoption: Externalities Input and Output Market Inefficiencies Land Market Inefficiencies Labor Market Inefficiencies Credit Market Inefficiencies Risk Market Inefficiencies Informational Inefficiencies Implications of Constraints and How to Address Them Several of these factors are clearly related to poorly functioning markets in rural areas, such as “missing markets” for risk, credit, or land (i.e. a lack of formal insurance providers, financial institutions, or the ability to buy, sell, own, or reliably hold onto one’s land). Efforts that address these constraints can focus on increasing the individual’s capacity to adopt. For example, alternatives to standard forms of collateral (e.g. future profits instead of current property) may improve access to credit for the very poor without necessarily addressing the functioning of the credit market overall. In other cases, even profitable and accessible technologies go unadopted for behavioral reasons, such as self-control problems or aversion to losses. Behavioral economics offers an intriguing set of theories on how to help people overcome these heuristics and biases, and applying these ideas to the promotion of agricultural technologies may help increase adoption. Constraints to Adoption are Interrelated The factors that constrain adoption do not, of course, exist in isolation and the presence of one constraint may be exacerbated by the presence of others. Little is known, however, about the relative efficacy of interventions to address constraints one-by-one versus interventions that address a suite of constraints simultaneously. Other factors, such as gender, cut across the constraints and affect the strategies for and the distributional consequences of overcoming each of the adoption constraints. To the extent possible, research under ATAI will go beyond addressing single constraints to investigate whether it is necessary to work on multiple constraints at once or whether progress can be made on single constraints. Meeting the Expected Profitability Condition An agricultural technology may dramatically increase yields or agricultural output but that does not necessarily mean that it should be adopted. For example, some crops may have higher yields but also may be more sensitive to drought. Making these technologies profitable requires large investments in irrigation infrastructure, which – in some places – may be very costly. Once the added costs of infrastructure development are factored in, the comparison of costs and benefits for the new crop may not make it worthwhile for either society or for the individual. The individual farmer would benefit more from receiving the money directly since the costs of the technology are greater than the benefits. When calculating whether or not a technology is worthwhile, it is therefore important to take into consideration the labor and capital investments that are necessary to enable adoption of the technology. In the irrigation example, the labor and capital costs of infrastructure development are real costs. In general, if the real costs are less than the total value created by higher adoption rates, then the investment is worthwhile. However, market inefficiencies may add additional “costs” that make the project appear unprofitable. For example, investments with high initial fixed costs, such as irrigation development, may present difficulties for securing a loan if credit markets are weak. The initial investor may not be able to recover these fixed costs from future users if contracting is difficult. Similarly, at the household level, worthwhile investments may be bypassed if market inefficiencies lower the profits that the farmer receives from adoption. In addition to market imperfections, profitability is also affected by factors that range from individual tastes and preferences to macroeconomic policy. Defining a “Good” Technology We define a good technology as one that is profitable in an ideal world without market inefficiencies or other adoption constraints. In that world, adoption perfectly reveals whether a technology creates benefits greater than its costs. However, moving away from the ideal, the individual adoption decision reflects all of the distortions created by market failures and market inefficiencies. Consequently, an agricultural technology that is profitable to one farmer may not be profitable to her neighbor because of differences in credit access or because of household-specific labor constraints. Assessments of the profitability of existing agricultural technologies often stop at the demonstration plot, and may not include all inputs such as household labor. Thus, in many cases, we lack even the information needed to determine where to best invest resources aimed at improving farmer welfare through technology adoption.
Posted on: Tue, 30 Jul 2013 09:03:16 +0000
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