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Technology Adoption under Production Uncertainty: Theory and Application to Irrigation Technology
Author(s) -
Koundouri Phoebe,
Nauges Céline,
Tzouvelekas Vangelis
Publication year - 2006
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2006.00886.x
Subject(s) - production (economics) , economic shortage , irrigation , order (exchange) , hedge , capital (architecture) , business , economics , agricultural engineering , natural resource economics , environmental economics , microeconomics , finance , engineering , geography , ecology , biology , linguistics , philosophy , archaeology , government (linguistics)
We propose a theoretical framework to analyze the conditions under which a farmer facing production uncertainty (due to a 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. The empirical results suggest that farmers choose to adopt the new technology in order to hedge against production risk. In addition, we show that the farmer's human capital also plays a significant role in the decision to adopt modern, more efficient irrigation equipment.