Market Imperfections and Farm Technology Adoption Decisions - A Case Study from the Highlands of Ethiopia

Abstract

This paper investigates the impacts of market and institutional imperfections on technology adoption in a model that considers fertilizer use and soil conservation to be joint decisions. Controlling for plot characteristics and other factors, we found that a household’s decision to adopt fertilizer significantly and negatively depends on whether the same household adopts soil conservation. The reverse causality, however, was insignificant. We also found that outcomes of market imperfections, such as limited access to credit, plot size, risk considerations, and rates-of-time preference, were significant factors in explaining variations in farm technology adoption decisions. Relieving the existing market imperfections will most likely increase the adoption rate of farm technologies.