Can risk aversion towards fertilizers explain part of non adoption puzzle for hybrid maize? Empirical evidence from Malawi

This study investigates the linkage between attitudes towards risk and adoption.

We empirically examine the relative risk premium related to fertilizer-use among 404 farmers from Malawi and examine the relationship between risk aversion on fertilizer-use and the adoption of hybrid maize. Results show that Malawian farmers exhibit absolute Arrow-Pratt risk aversion towards the use of fertilizer. The findings also reveal that risk aversion towards the use of fertilizer is strongly associated with low intensity of hybrid maize adoption and that other than the safety net programs, human and financial capital variables such as age, household size, land size and off-farm income can be helpful in explaining the non-adoption puzzle. While safety net programs such as the free input distribution increase the likelihood of adoption, they are associated with low levels of adoption intensity for hybrid maize. A key lesson is that when considering promoting a technology, it is important to assess the profit distribution associated with the use of complementary inputs and its implications for risk preference among technology users in order to avoid formulating misguiding policies.

Co-authors:

Franklin Simtowe, Alexander Phiri, Alban Thomas and Manfred Zeller

EfD Authors

Dr. John Mduma Senior Lecturer & Research Fellow

Keywords

Risk preferences

Files

Related discussion paper 620.1 kB

Centers

tanzania

Type of publication

Peer reviewed

Reference

Simtowe, F., J. Mduma, A. Phiri, A. Thomas, and M. Zeller. 2006. "Can Risk-aversion Towards Fertilizer Explain part of the Non-adoption Puzzle for Hybrid Maize? Empirical Evidence from Malawi". Journal of Applied Sciences 6(7): 1490-1498.

Environment for Development

Environment for Development