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Technology Adoption under Production Uncertainty: Theory and Application to Irrigation Technology

Phoebe Koundouri (), Celine Nauges and Vangelis Tzouvelekas

American Journal of Agricultural Economics, 2006, vol. 88, issue 3, 657-670

Abstract: 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. Copyright 2006, Oxford University Press.

Date: 2006
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Handle: RePEc:oup:ajagec:v:88:y:2006:i:3:p:657-670