Selection and Comparative Advantage in Technology Adoption

62 Pages Posted: 28 Sep 2006

See all articles by Tavneet Suri

Tavneet Suri

Massachusetts Institute of Technology (MIT) - Sloan School of Management

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Date Written: September 2006

Abstract

This paper examines a well known empirical puzzle in the literature on technology adoption: despite the potential of technologies to increase returns dramatically, a significant fraction of households do not use these technologies. I study the use of hybrid maize and fertilizer in Kenya, where there are persistent cross-sectional differences in aggregate adoption rates with a large fraction of households switching in and out of adoption. By allowing for selection of farmers into technology use via comparative advantage differences, I examine whether the yield returns to adopting hybrid maize vary across farmers. If so, high average returns can coexist with low returns for the marginal farmer. My findings indicate the existence of two interesting subgroups in the population. A small group of farmers has potentially high returns from adopting the technologies. Yet, they do not adopt. This lack of adoption appears to stem from supply and infrastructure constraints, such as the distance to fertilizer distributors. In addition, a larger group of farmers faces very low returns to adopting hybrid maize, but chooses to adopt. This latter group might benefit substantially from the development of newer hybrid strains to increase yields. On the whole, the stagnation in hybrid adoption does not appear to be due to constraints or irrationalities.

Keywords: technology, heterogeneity, comparative advantage

JEL Classification: C33, O12, Q12

Suggested Citation

Suri, Tavneet, Selection and Comparative Advantage in Technology Adoption (September 2006). Yale University Economic Growth Center Discussion Paper No. 944. Available at SSRN: https://ssrn.com/abstract=933124

Tavneet Suri (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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