Can Risk-aversion Towards Fertilizer Explain Part of the Non-adoption Puzzle for Hybrid Maize? Empirical Evidence from Malawi

Abstract

There is a wide acceptance that technological change is crucial in achieving sustained agricultural productivity growth. Increased adoption of improved technologies remains the key to achieving food security in most parts of the world and more so in the Sub-Saharan Africa region where agriculture is mainly characterized by low use of improved technology and low productivity.

This study investigates the linkage between attitudes towards risk and adoption. The authors empirically examine: (a) the relative risk premium related to fertilizer-use among 404 farmers from Malawi and (b) the relationship between risk aversion on fertilizer-use and (c) the adoption of hybrid maize. Using the moments based approach the authors empirically examined the relative risk premium related to fertilizer-use among farmers.

The study has shown that Malawian farmers exhibit absolute Arrow-Pratt risk aversion towards the use of fertilizer. The document authors found that risk aversion on fertilizer use negatively affects the extent of adoption of hybrid maize.

The study reveals that when considering promoting the adoption of hybrid maize, it is important to assess the profit distribution and its implications for risk preferences towards the use of complementary inputs such as fertilizer.

Failure to do so would lead to the formulation of wrong policies. Human and financial capital variables such as the following have a significant impact on the adoption of hybrid maize. (a) age, (b) household size, (c) size of land and (d) off-farm income, A notable finding is that while safety net programs such as the free input distribution increase the likelihood of adoption, they are associated with low levels of the extent of adoption. This emphasizes the lack of financial capacity to purchase inputs as a key constraint to adoption. Without necessarily underscoring budgetary implications, it is important for safety nets programs such as the Starter Pack Scheme and the Targeted Input Program (TIP) that are being implemented in Malawi to have their packages revised upwards in order to increase the extent of adoption for hybrid maize.