Estimating Input Complementarities with Unobserved Heterogeneity: Evidence from Ethiopia

Research output: Contribution to journalJournal articlepeer-review

  • Kibrom Araya Abay
  • Guush Berhane
  • Alemayehu Seyoum Taffesse
  • Kibrewossen Abay
  • Bethelhem Koru

The level of technology adoption is often characterised as low in Africa. Recent evidence, however, points to the coexistence of substantial heterogeneity across farm households and the lack of a suitable mix of inputs for farmers to take advantage of input complementarities. We use a random coefficients multivariate probit model to quantify the complementarities between agricultural inputs and alternative forms of unobserved heterogeneity effects in modeling farmers' technology adoption decisions. The empirical analysis reveals that, conditional on various types of unobserved heterogeneity effects, farmers' technology adoption decisions exhibit strong complementarity for some inputs. The analysis also reveals substantial unobserved heterogeneity effects. We show that ignoring these behavioural features (unobserved heterogeneity and input complementarity) has important implications in quantifying the effect of some policy interventions that are meant to facilitate technology adoption. In particular, ignoring these features leads to significant overestimation of the effectiveness of extension services.

Original languageEnglish
JournalJournal of Agricultural Economics
Volume69
Issue number2
Pages (from-to)495-517
ISSN0021-857X
DOIs
Publication statusPublished - 21 Sep 2017

    Research areas

  • Input complementarity, maximum simulated likelihood approaches, random coefficients multivariate probit, technology adoption, unobserved heterogeneity

ID: 197798131