The Market Impact of the Simultaneous Adoption of Complementary Agricultural Technologies.

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Title: The Market Impact of the Simultaneous Adoption of Complementary Agricultural Technologies.
Author: Mensah, Edwin Clifford
Advisors: Prof. Michael Wohlgenant, Committee Co-Chair
Prof. Michele Marra, Committee Chair
Dr. Ada Wossink, Committee Member
Prof. Walter Thurman, Committee Member
Abstract: The purpose of this study is to examine the factors that influence the simultaneous adoption of no-till farming technology and Roundup Ready soybean (RR) varieties. The research is also extended to analyze the welfare benefits of the adoption of new agricultural technologies. We first investigate the factors that influence the single adoption of the individual technologies using a feasible generalized least squares (FGLS) estimation method which also allows us to correct for the presence of heteroskedasticity in the model. Given that our dependent variables were the proportion of acres we were also able to use the two-limit Tobit procedure to verify the extent of the adoption of the two technologies. Of the explanatory variables used in this study, farm size, the level of education, experience, convenience factors, cost and yield difference were found to be significant factors in explaining the adoption and the extent of adoption of these technologies. Furthermore, to answer our question on the simultaneity between the two technologies, we compare the results of two separate single equation probit models for the adoption of the two technologies with that of a simultaneous two-equation econometric model and draw conclusions regarding the endogenous nature of the adoption of the two technologies by constructing a Wu-Hausman test statistic. We infer from our results that in explaining the adoption of the two technologies, accounting for simultaneity is not only important for the no-till decision but the decision to adopt RR soybean varieties as well. We also found in this study that there is some synergy in the use of the two technologies hence it is concluded that the two technologies are likely to be complementary to each other. The market impact analysis was achieved by using the Alston, Norton, and Pardey (1995) approach. We assessed the welfare effects of the adoption of RR soybean varieties for both a parallel and pivotal shift of the supply curve. The theoretical model implemented assumes two main regions; a large producer country adopting the new technology (U.S.) and all other countries aggregated into the rest of the world (ROW), the non-adopting region. Although producers and consumers in the U.S. gained a greater share of the total benefits, the economic surplus gained by consumers in the ROW were offset by the producer losses in the ROW. Producers in the U.S. had the greatest share of the total economic surpluses. However, the magnitude of the total benefits greatly depends on the nature of the supply shift. Our results show that the total benefits for a pivotal shift are about half that of a parallel shift.
Date: 2005-07-19
Degree: PhD
Discipline: Economics

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