Bundling Genetic and Financial Technologies for More Resilient and Productive Small-Scale Agriculture

48 Pages Posted: 13 Sep 2021 Last revised: 18 Nov 2022

See all articles by Steve Boucher

Steve Boucher

University of California, Davis - Departments of Economics and Agricultural Resource Economics

Michael Carter

University of California, Davis

Jon Einar Flatnes

Chr. Michelsen Institute (CMI)

Travis J. Lybbert

University of California, Davis - Department of Agricultural and Resource Economics

Jonathan Malacarne

University of Maine

Laura Paul

University of Delaware

Date Written: September 2021

Abstract

Utilizing a multi-year, spatially diversified randomized controlled trial spanning two African countries, this paper explores whether bundled genetic and financial technologies can boost the resilience and productivity of small-scale farmers who are exposed to significant risk. The analysis shows that both moderate droughts and more severe yield losses undermine the resilience of control group households, and that these shocks have long-lasting effects as they decapitalize households who invest less in years following these shocks. Severe yield shocks also increase hunger and food insecurity. The genetic technology— drought tolerant seeds—provides significant protection against moderate drought events and mitigates the long-term drop in farm productivity seen in the control group. The financial technology—satellite-based index insurance—offsets the long-term consequences of severe yield losses that are not mitigated by the drought tolerant seeds. Finally, the analysis shows that farmers who experienced shocks and saw both technologies in action subsequently increase their agricultural investment at both the extensive and intensive margins. The technologies thus not only allow farmers to return to their pre-shock positions, but also allow them to move toward higher expected incomes. Unfortunately, this apparent experiential learning cuts both ways. Farmers who did not experience the efficacy of the risk management technologies backed away from using them in the following season. Our findings thus showcase important complementarities between genetic and financial risk mitigating technologies as well as the challenge of inducing sustained uptake of technologies that only occasionally reveal their benefits.

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Suggested Citation

Boucher, Stephen and Carter, Michael and Flatnes, Jon Einar and Lybbert, Travis J. and Malacarne, Jonathan and Paul, Laura, Bundling Genetic and Financial Technologies for More Resilient and Productive Small-Scale Agriculture (September 2021). NBER Working Paper No. w29234, Available at SSRN: https://ssrn.com/abstract=3922508

Stephen Boucher (Contact Author)

University of California, Davis - Departments of Economics and Agricultural Resource Economics ( email )

2105 Social Sciences & Humanities Building
One Shields Avenue
Davis, CA 95616
United States

Michael Carter

University of California, Davis ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

Jon Einar Flatnes

Chr. Michelsen Institute (CMI) ( email )

P.O.Box 6033 Bedriftssenteret
N-5892 Bergen, 5006
Norway

Travis J. Lybbert

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States

Jonathan Malacarne

University of Maine ( email )

Orono, ME 04469
United States

Laura Paul

University of Delaware

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