Crop Production Risk Implication on Intensity of Technology Adoption in Ethiopia: Multivariate Probit Model Analysis

Abstract

The main objective of the study is investigating the impact of production risks on adoption of improved production technologies (such as improved seed, inorganic fertilizer and chemical inputs) and the level of adoption of multiple improved production technologies in Ethiopia particularly in Amhara region. The study used two years cross sectional data collected in 2011 and 2013. The study applied two stage regression analysis, first, I regressed the production function in order to drive expected output and risk factors (variance and skewness). In the second stage, I have regressed multivariate probit and order probit models of adoption including expected output, variances and skewness of output as risk measure.  The result revealed that expected output, variance and skewness of output are major determinant for adoption decisions of improved seed, inorganic fertilizer, chemical inputs and the level of adoption of multiple improved production technologies. Moreover, credit access, membership of farm cooperatives, ownership of livestock, land size and percentage of irrigated land size positively and significantly determine the adoption decisions of improved seed, inorganic fertilizer and chemical inputs and the level of adoption of multiple improved production technologies. To increase adoption of modern production technology consequently increase production and reduce production risk. Policy makers should put emphasis on overcoming credit market failures, to create strong and sustainable farm cooperatives and production risk and risk aversion farmers should be considered when designing economic policies.

Key words: production risk, modern farm technology adoption, multivariate probit model and Ethiopia.

DOI: 10.7176/RJFA/13-5-02

Publication date:March 31^st 2022