Credit constraint and agricultural technology adoptions: evidence from Ethiopia

Megersa Endashaw Lemecha

Agricultural Finance Review, 2023, vol. 83, issue 3, 395-415

Abstract: Purpose - This paper investigates constraints to yield enhancing technology adoptions, highlighting credit using data pooled from the first three waves of the Ethiopian socio-economic surveys. Design/methodology/approach - Direct elicitation methodology is used to identify household's non-price credit rationing status. The panel selection model specified to examine causal effects of credit constraint on adoption variables allows us to tackle self-selection into adoptions and potential endogeneity of credit constraint while controlling for unobserved heterogeneity in both the selection and main equations. Findings - Results show that about 54% of sample households face credit rationing, predominantly demand-side risk rationing. There is a negative association between measures of credit constraint status and adoption variables. The effect is stronger when the demand-side credit rationing is accounted for and when within household variation in credit constraint status overtime is considered as opposed to across constrained and unconstrained households. Practical implications - Expanding physical access to institutional credit alone may not necessarily spur increased uptake of credit and instant investment by farm households. For a majority of them to take advantage of available credit and improved technology, interventions should also aim at minimizing downside risks. Originality/value - This paper incorporates the role of downside risk in influencing farmer's decisions to uptake credits and subsequently his/her adoption behaviors. The researcher approached the topic by state-of-the-art method which allows obtaining more reliable results and hence more specific contributions to research and practice.

Keywords: Direct elicitation methodology; Credit constraint; Agricultural technology adoptions; Panel selection model; Ethiopia (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-06-2022-0075

DOI: 10.1108/AFR-06-2022-0075

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