Technology adoption under production uncertainty: Theory and application to irrigation technology
Résumé
The present paper offers a theoretical framework to analyze the conditions under which a farmer facing production uncertainty (due to possible water shortage) and incomplete information will adopt a more efficient irrigation technology. A reduced form of this model is empirically estimated using a sample of 265 farms located in Crete, Greece for the 1995-96 cropping period. The empirical results suggest that production risk significantly affects the probability of adoption thus, showing that farmers are not risk-neutral, and that they choose to adopt the new technology in order to hedge against production risk. In addition, we show that the farm’s human capital also plays a significant role in the decision to adopt modern more efficient irrigation equipment.