The Value of Information in Technology Adoption: Theory and Evidence from Bangladesh

Abstract

We develop a theoretical model in which farmers' adoption decisions are based on their degree of risk aversion and on the information about the quality of a new technology received from other farmers. To test the predictions of this model, we run a field experiment in Bangladesh. We show that (treated) farmers who receive more training in terms of the quality of the System of Rice Intensification (SRI) technology, and thus have more accurate information about this technology, have a higher impact on the adoption rate of the untreated farmers. We also find that more risk-averse untreated farmers tend to adopt less and are less influenced by their treated peers. Finally, a trained farmer's impact on his untrained peers increases if he adopts himself the SRI technology. Our results thus indicate that the crucial determinant of technology adoption for untreated farmers is their degree of risk aversion and the accuracy and reliability of the information transmission about the quality of the technology circulated among farmers.

Keywords: Bayesian model, information, technology adoption, risk attitude, RCT, Bangladesh

JEL Classification: O13, Z13