Minimum-Data Analysis of Technology Adoption and Impact Assessment

for Agriculture-Aquaculture Systems

John AntleOregon State University

Roberto ValdiviaMontana State University

AquaFish CRSP RD-IA Meeting, Seattle Oct 4-7 2010

Reminder: Our Goals• Learn about data, model for IA• Design IA for AquaFish investigations• Plan data collection

– What data do we need?– Does your project have data?– Do you need to collect more data?– Set up a work plan for data collection and

preparation.• Plan analysis & presentations

Impact Assessment using the TOA-MD model

• Technology Adoption leads to Impacts– Define the relevant farm populations– Describe existing system and new system(s)

based on improved technology (without vs with, baseline vs counterfactual)

– Simulate adoption of new system(s) in the farm populations

– Quantify impacts of adoption using Indicators

Logical structure of TOA-MD: Adoption analysis

Farm population w/base tech & base indicators (poverty, sustainability)

Sub-populations: non-adopters (base tech & indicators) adopters (improved tech, indicators)

Result: r% adopters, (1-r)% non-adopters

Adoption

Logical structure of TOA-MD: Impact analysisExample: Poverty

System 1 income distribution (Poverty = 65%)

System 2 income distribution (Poverty = 25%)

System 1 & 2 income distribution (Poverty = 45% )

1-r% non-adopters r% adopters

TOA-MD Components

System characterization

Adoption rate

Population (Strata)

Impact indicator design

Opportunity cost distribution

Outcome distributions

Indicators and Tradeoffs

Design

Data

Simulation

Design• Populations and strata

– Spatial: agro-ecozones, political units, watersheds, location

– Socio-economic: farm size, wealth, age, gender• Systems

– Crop, livestock, aquaculture subsystems– Sub-systems composed of activites– Farm household

• Impact indicators– Population mean

Design (cont.)

• Impact indicators– Economic

• Mean farm or per capita income• Poverty

– Environmental• On-farm: soil quality• Off-farm: water quality, GHG emissions

– Social• Nutrition• Health• Intra-household distribution

Design (cont.)

• Indicator design– Population means– Probability of exceeding a threshold

• Headcount poverty: % below poverty line• Nutritional threshold• Environmental threshold

TOA-MD Components

System characterization

Population (Strata)

Impact indicator design

Opportunity cost distribution

Outcome distributions

Design

Data

Data• Economic

– Farmed area in each stratum (ha)– Population mean net returns for each system in each

stratum • Yield, price, costs of production, and land allocation to

each activity in each system• Or … direct observation of returns to the whole system

– Standard deviation of net returns by system and stratum– Correlation between returns to each system

• Environmental and social– Mean and CV for each outcome for each system– Correlation with net returns

Data (cont.)• Household: means and CVs for

– Farm (ha), herd (head or TLU) and pond (ha) sizes – Family size (number of persons)– Non-agricultural income

TOA-MD Components

System characterization

Adoption rate

Population (Strata)

Impact indicator design

Opportunity cost distribution

Outcome distributions

Indicators and Tradeoffs

Design

Data

Simulation

Simulation• Adoption

– Baseline: all farms using system 1– System 2 becomes available, r% adopt, (1-r)%

continue to use system 1• Impact Indicators

– Indicators calculated for each system and each stratum

– Population indicators are a weighted average of indicators for farmers using each system in each stratum.

Implementing IA: Agricultural Systems Design

Farm Household• Income• Health & nutrition• Distribution &

assets

Crop system• productivity• costs (variable, fixed)• input use (fertilizers, other)• land allocation• soil & water management

Aquaculture system• productivity• costs • feed• water & waste management• pond construction and maintenance

Livestock system• productivity • costs• herd health• feed quantity & quality• manure management

Environmental processes• on-farm (soils)• off-farm (runoff, erosion,

GHG, pond effluent)

The Malawi Case Study: Integrated Agriculture-Aquaculture• population: southern Malawi• strata: 5 southern districts• systems: • system 1: maize, beans other subsistence crops• system 2L: system 1 with small ponds, low integration• system 2H: system 1 with larger ponds, irrigated vegetables,

high integration• random survey of farms by strata and system

Subsistence crops

Aquaculture

Irrigated vegetables

The Malawi Case Study

• We will use the case study to show you the kinds of data we need to do impact assessment of aquaculture systems

• At the same time, we will evaluate the data needed for your projects and design a plan to acquire them and implement IA

Subsistence crops

Aquaculture

Irrigated vegetables

Exercise 1: Populations, Systems & Indicators1. Define the populations and strata for your investigations

(you may want to draw a map)2. Develop a schematic diagram for the existing or baseline

system (system 1). 3. Develop a schematic diagram for the system(s) with

improved technologies (system 2).4. Define the relevant indicators for your investigations.

Modeling Adoption Rates• Farmers choose practices to maximize expected returns

• Farmers expect to receive v1 ($/ha/season) for system 1

• Farmers who adopt system 2 expect to earn v2 ($/ha/season)

• The opportunity cost of changing from system 1 to system 2 is defined as ω = v1 – v2

Note: ω < 0 means gain from adoption of system 2

ω > 0 means loss from adoption of system 2

• Returns vary spatially, so opportunity cost varies spatially, and is described with the distribution (ω)

Construct spatial distribution of

opportunity cost

ω < 0

(adopters)

ω > 0

(non-adopters)

(ω)

Opportunity cost () and adoption rate (r)

System 1 System 2 w AdoptExample 1Farm 1 100 80 20 0

Example 2Farm 1 75 85 -10 1

Example 3Farm 1 100 80 20 0Farm 2 75 85 -10 1

Example 4Farm 1 100 80 20 0Farm 2 75 85 -10 1Farm 3 90 120 -30 1

r = Σ Adopt /N = 0/1 = 0

r = Σ Adopt /N = 1/2 = 0.5

r = Σ Adopt /N = 1/1 = 1

r = Σ Adopt /N = 2/3 = 0.67

0()

100

Opportunity cost and adoption rate: 1 farm

ω =20, r = 0

r (%)

0()

100

Opportunity cost and adoption rate: 1 farm

ω =-10, r = 1

r (%)

0()

Rate

100

Opportunity cost and adoption rate: 2 farms

0()

Rate

100

Opportunity cost and adoption rate: 3 farms

0()

Rate

100

Opportunity cost and adoption rate: Many farms

()

100

0 < ω

r

Derivation of adoption rate from spatial distribution of

opportunity cost

ω < 0

r (0)

r(a) d

Varying the Adoption Rate • We often want to use the model to see the effects of a range of

different adoption rates

• E.g., low adoption rates may occur because farmers cannot get access to the technology or lack resources to invest

• E.g., high adoption rates may occur because farmers are required by government regulations to use a technology that reduces pollution

• We assume farmers choose system 2 if it is more profitable than system 1

• As we “force” the model to lower or higher adoption rates, average farm income in the population will be lower than at the profit-maximizing adoption rate.

Varying the Adoption Rate (cont.)• To simulate the effects of farmers using different adoption

rates, the model can simulate the effect of giving all farmers an incentive payment or penalty (PAY) for using system 2. This payment is used to calculate the adoption rate, but it is not included in the calculation of farm income.

• With an incentive payment, famers use system 2 if:

v1 < v2 + PAY

or if v1 – v2 < PAY

or if ω < PAY

• So when PAY = 0 we get the adoption rate that occurs without any incentive payment or penalty. This is the adoption rate that gives the highest average farm income in the population.

()

, Pay

100

0 < ω < Pay0

Ad

op

tion

R

ate

PAY0

Adoption rate with incentive payment (Pay)

ω < 0

ω > Pay0

Adoption rate with Pay0 > 0

()

, Pay

100

Ad

op

tion

R

ate

Using PAY to simulate effects of different

adoption rates

Adoption rates with

Pay <0

Adoption rates with Pay >0

PAY < 0

PAY > 0

Parameters of the Distribution of Opportunity Cost

Farms are heterogeneous so = v1 – v2 varies across farms.

We use the mean and variance of in the MD model.

Mean: E () = E (v1 ) – E (v2 ) ($/ha)

Suppose system 1 has one activity, then:

E (v1 ) = P11 Y11 – C11 – f11

P11 = price of output for activity ($/Y/time)

Y11 = yield of activity 1 (Y/ha/time)

C11 = variable cost of activity 1 ($/ha/time)

f11 = fixed cost of activity 1 ($/ha/time)

Note: subscripts are system, activity

System 2 with 1 activity:

E (v2 ) = P21 Y21 – C21 – FC21

P21 = price of product of activity 1, system 2

Y21 = output of activity 1, system 2

C21 = variable cost of activity 1, system 2

f21 = fixed cost of activity 1, system 2

Note: subscripts are system, activity

Variance of :

i standard deviation of returns, system i

ik covariance of returns, system i and k

ρ12 12/12

2

E( - E())2 = E({v1 - E(v1)} – {v2 - E(v2)})2

= 12 + 2

2 – 212

= 12 + 2

2 – 212ρ12

Multiple Activities in a System

Suppose system 1 has 2 crop activities

Each activity k uses a share W1k of the land

E.g., activity 1 = maize, activity 2 = beans

farm size = 2 ha, maize = 1.5 ha, beans = 0.5 ha

Then W11 = 1.5/2 = 0.75, W12 = 0.5/2 = 0.25

Now vik = Pik Yik – Cik – fik , for i,k = 1,2

E (v1 ) = W11 v11 + W12 v12

E (v2 ) = W21 v21 + W22 v22

Remember: first subscript = system, second subscript = activity

Data: Malawi case study• Surveys

– Random sample of farms without IAA and with IAA in each stratum (district)

• Areas, farm size, household size, income, health, nutrition…

• Other economic data from secondary sources– Crop yields, prices, costs of production– Yield variances– Land use

• Environmental and social data, as needed:– Pond effluent & water quantity, quality data– Soil, climate data for crop system

• Estimate crop yields using crop simulation models?• Estimate change in soil nutrients or soil carbon?

– Nutrition: e.g., protein consumption

Exercise 2: Data Preparation

1. Open Database\malawi_tables.doc. Review the data tables for Malawi, note the way the data are organized by strata.

2. Open Database\MW_DATA_L.xls. This is the data template for the model. This file is set up with data to analyze adoption of System 2L, the aquaculture system with low integration.

3. Look at the Variable Description sheet in the data template, and then the other sheets with highlighted variables. Identify how data from the tables have been put into the sheets in the template.

4. As you review the data template, start preparing a list of data needed for the systems you identified in Exercise 1 for your investigations. Identify which variables are available, which ones may need to be obtained from a survey or from secondary sources.

Exercise 3: Run the Model for Adoption of the Low-Integration System (System 2L)

1. Open the model Econmod\TOA_MD6_AF.xls.2. Following the directions given, load the data Database\

MW_DATA_L.xls and run the model. 3. Examine the model output in the sheets and graphs.4. Interpret the results, using the variable descriptions in

the data template. 5. What is the predicted adoption rate for System 2L?6. What is the poverty rate with zero adoption? How much

is poverty reduced by adoption of System 2L?7. Can you explain what happens to net returns per farm as

the adoption rate varies?

Exercise 4: Set up a model for adoption of System 2H by farms using System 1

1. Find the data in the data tables for system 2H.2. Open the data template for system 2L. Put the data for

system 2H into the sheets where system 2 data belong.3. Run the model.4. Compare the results for System 2L and 2H. Can you

explain the differences you see in adoption rates, poverty and nutrition outcomes?

Exercise 5: Sensitivity analysis to the parameter RHO12

• Explain what RHO12 represents in the model. • What happens when RHO12 = 1? (Hint: review the

formula for the variance of ω)• Run the model for adoption of System 2H with different

values of RHO12• Can you explain why the adoption rate changes as you

change RHO12?• Would you say the model is “sensitive” to this

parameter?

Exercise 6: Set up a model for adoption of System 2H by farms using System 2L

Hint: you need data from the two data templates you have already used.

Compare the results from the three models you have now run: can you explain the differences?

0()

r (%)

s = 0

r = 0

100

Variance of opportunity cost and adoption rates

Note effect of variance on adoption rate