TECHNOLOGY ADOPTION, HAPPINESS AND CAPABILITIES AMONG SMALL FARM

PRODUCERS IN RURAL ETHIOPIA  

PASQUALE LUCIO SCANDIZZO, SARA SAVASTANO, FEDERICA ALFANICEIS - University of Rome “Tor Vergata”

16th ICABR Conference – 128th EAAE Seminar“The Political Economy of the Bioeconomy: Biotechnology and Biofuel”

Ravello, Italy, June 24-27, 2012

MOTIVATIONS

• In SSA, most of the population reside in rural areas, and rely on agriculture to secure their livelihood and increase their level of well-being

• In spite of the fact that many economic and social strategies have been implemented to stimulate industrial growth, Ethiopia is heavily dependent on agriculture

• Low and volatile incomes mainly depend on results of harvesting seasons but are also associated with poor living conditions related to inadequate sanitary and health, and education facilities

• New technology adoption in agriculture is of central interest to both academics and policy makers

Objectives of the study

• To explore the relationship between agriculture performance and happiness of rural households

• To investigate the link between agriculture income, technological progress, subjective assessment of life satisfaction and, above all, the capabilities of rural people to combine self-management and bio-economic skills

Measuring Farm Households’ Economic Well-Being

• Households living in rural areas of developing countries derive most of their incomes from agriculture

• The level of economic well-being can be gauged using monetary measures (e.g., income from agriculture production and non farm income), or expenditure on goods and services

Is economic well-being determined by the level of income from agriculture production?

• Increases in consumption generally lead to improvements in the level of individual well-being (Fischer, 2009; Courard-Hauri, 2007) but income and consumption only partially account for farmers’ well-being in developing countries

• Access to land is fundamental for rural households, with land rights crucially linked to the amount of land-related investments undertaken by farmers to obtain significantly higher yields and revenues (Kutcher and Scandizzo, 1981; Besley, 1995; Rozelle et al., 1996; Deininger and Feder, 2001)

• Recent evidence for developing countries has shown a positive relation between access to value chain or land tenure security, and subjective well-being (Van Landerghem et al., 2008; Dedehouanou and Maertens, 2011)

Literature on Households’ Economic Well-Being

New Technologies, Market Integration and Subjective Well-Being

• Elements such as land security, water access, adoption of new technologies (e.g., improved seed varieties and fertilizer), and market integration may be crucial in the context of farm activities and economic well-being of small farmers

• Adoption of new technologies is a very sensitive issue, especially in SSA

• Households more integrated in the market, with greater access to resources and happier may be more dynamic and able to realize riskier investments, including the decision to adopt new technologies

Technology Adoption in SSA: Constraints and Incentives

The adoption of improved seeds and fertilizer has not been as pervasive as during the Green Revolution, with a substantial gap emerging between countries’ production, farmers’ demand and knowledge, and direct usage of these new technologies

Possible reasons:

a. A mismatch between the planting season in which farmers should access the seeds, and the time when they are able to access to them.

b. A lack of improved seeds in the village seeds are delivered in the village on a “first come first serve” basis thereby excluding farmers that are located far from the delivery location

c. The availability outside the village farmers are forced to buy seeds on markets different from the local one, and in some cases, paying higher costs to adopt improved varieties

Data Source and Descriptive Statistics

• Data from the 2009 Ethiopian Rural Households Survey (ERHS) including, among others, information on perception of poverty, well-being and trust; restricted sample of 1,253 households, out of which 47.18% declared to be satisfied with life

• We used self-rated satisfaction with life, divided in 5 categories (from 1=Very unsatisfied to 5=Very satisfied), as measure of overall household welfare. The choice of this variable is consistent with results from the PCA on a set of other survey variables related with perception of life

• Farmers cultivate on average 1.47 ha of land, 53.5% of them uses fertilizer, 22.8% adopts improved seeds and 71% owns one or more plough (proxy for labor augmenting farm capital)

Descriptive StatisticsUnit Mean St. Dev. Min Max

Socio-Economic CharacteristicsHH size Nb. 5.82 2.56 1 16Age of the head Years 52.61 14.85 15 100Children in the HH % 27.57 20.66 0 83.33Female adults in the HH % 26.32 17.38 0 100

Education of the head Years 1.83 2.81 0 13HH head with no education % 47.73 49.96 0 100Satisfaction with lifeSatisfaction with life in 2009 3.03 1.15 1 5Satisfaction with life in 2004 2.97 1.09 1 5Farm CharacteristicsNet agriculture income in 2009 USD 610 667 -270 6,491HHs using fertilizer % 53.47 49.90 0 100HHs adopting improved seeds in 2009 % 22.83 41.99 0 100HHs practicing soil conservation from 2004 to 2009 % 17.00 37.58 0 100HHs own one or more plough % 70.95 45.42 0 100HHs having experienced drought from 2004 to 2009 % 40.78 49.16 0 100HHs having experienced input prices increase from 2004 to 2009 % 36.15 48.06 0 100

Figures refer a sample of 1.253 farm household

Estimation Method

),...,1( ni

iiiiv

iii STXVPVPSWL

Where,

• VPi Household income from agriculture (crop and livestock) production

• VPiv Income from agriculture production of “neighbors”

• Xi Vector of variables of household socio-economic characteristics

• Ti Variables on new technology adoption

• Si Negative shocks which may have been experienced by the household, such as droughts, pests or diseases on crop production, increases on input prices, during the past five years

Following the literature (Ravallion and Lokshin, 2005), in our analysis, we use satisfaction with life (SWL) as categorical measure of utility for farmers

Estimation Results

Fourteen woreda dummies estimated but not reported. *Significant at 10%; ** Significant at 5%; *** Significant at 1%.

Ordered Probit on Satisfaction with Life in 2009 Coeff.

Satisfaction with life in 2004 0.0585*

Net total agriculture income in 2004 0.0001**

Leave-out mean for village in 2004 0.0005*

Leave-out mean for village squared in 2004 -0.0018***HH economic situation compared to 1 year before the interview 0.193***Log of HH size 0.285***Share of children in the HH -0.616***Share of female adults in the HH -0.497**Dummy for primary education of HH head -0.290*Household head working as farmer or family farm worker 0.270*Household head working as off-farm worker 0.0496Local availability of seeds 0.0411External availability of seeds – Proxy for extension in other villages -0.316*HH using fertilizer in 2009 0.164*HH practicing soil conservation measures since 2004 0.167*HH having experienced drought between 2004 and 2009 -0.232**HH having experienced input prices increase between 2004 and 2009 -0.183**HH owns one or more plough 0.189**HH owns one or more cell phone 0.267**Observations 1,253

Key Results

Satisfaction with life: probability of being in a higher class

Estimated Elasticities

Net agriculture income in 2004 0.020

Leave-out mean for village in 2004 0.067

Leave-out mean for village squared in 2004 -0.019

HH size 0.049

Children in the HH -0.022

Women in the HH -0.019

Threshold mean village agriculture income at which satisfaction with life response becomes negative

1,267 USD/year

Conclusions

• HH agricultural income has a positive and significant effect on life satisfaction, but a very small impact

• Average village agricultural income has a positive and significant effect, larger than HH income

• Its marginal effect on HH happiness follows a quadratic (inverted U-shaped) relationship and turns negative at the threshold value of 1,267 USD

• Family size has a positive effect on life satisfaction, much larger than income, but both the number of children and the number of women appear to have a marginal negative effect

Conclusions (cont’d)

• Adoption of fertilizer seems to be associated with higher level of well-being, a finding that suggests a positive interaction between happiness and dynamism of the household

• The availability of extension services (improved seed as proxy) in other villages has a negative effect on satisfaction, confirming the importance of community over personal variables