Analysing Smallholder Farmers’ Adoption of new Technology under the Consideration of Risk Attitudes and Time Preferences
von Arieska Wening Sarwosri
Datum der mündl. Prüfung:2020-12-07
Erschienen:2021-08-23
Betreuer:Prof. Dr. Oliver Mußhoff
Gutachter:Prof. Dr. Matin Qaim
Gutachter:Prof. Dr. Jann Lay
Dateien
Name:Dissertation_Arieska Wening Sarwosri.pdf
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Description:Dissertation
Zusammenfassung
Englisch
Technology adoption in agriculture plays a vital role in coping with exponential population growth. Since the Green Revolution in the 1960s, researchers have been extensively investigating issues and challenges in technology adoption. These issues are more complex in developing countries due to poverty and shortcomings in agricultural insurances. Poor farmers who are risk-averse and favor a higher discount rate tend to opt-out from adopting the innovations, causing poverty-traps. Emerging attention on environmental degradation from customers in more developed countries also gives pressure to farmers for practicing sustainable farming, especially when they grow controversial crops such as oil palm. High productivity and low production cost in comparison to other vegetable oils have led to palm oil dominating the world market. In one hand, the palm oil production increases farmers’ welfare and improves their nutrition intake. In the other hand, palm oil production threatens biodiversity and promotes deforestation. However, achieving farmers’ adoption of sustainable farming practices also meets challenges due to lack of awareness and information for environmental conservation. This dissertation proposes a topic of technology adoption under the consideration of risk attitudes and time preferences. The study was conducted in Jambi Province, Sumatra, Indonesia. We involved smallholder farmers (in later parts, we refer to them as “farmers”), who cultivated oil palm, rubber, and both. This dissertation consists of three papers covering: (1) farmers’ adoption of palm oil certification that indicates sustainable palm oil production; (2) farmers’ adoption of a new type of crops; (3) farmers’ risk attitude and time preferences, where we broaden our observations by involving farmers from another comparable developing country, namely India. The first paper investigates three policy scenarios to support farmers’ participation in palm oil certification. The certification programs were introduced to mediate the trade-offs between the economic benefits and environmental consequences of oil palm cultivation, for example, deforestation. However, farmers’ participation rates remain low, even though the certification programs have been introduced since many years. Regarding the escalating concern for environment, effective policies to increase farmers participation in the certification programs are needed. To evaluate the effect of the policy scenarios, we utilized a social dilemma experiment. We found that price premiums for certified palm oil and information about land-use change motivate farmers to conserve the forest. The second paper discusses oil palm adoption by farmers, which happened relatively fast, contradicting the literature that mentions farmers’ slow adoption. In Jambi, rubber was an important crop cultivated among generations. The farmers cultivate rubber in both agroforest and monoculture form, where the monoculture gives higher profits than agroforest. Meanwhile, farmers’ oil palm cultivation was initiated later, coupled with the transmigration program around the year 1900. In this program, the farmers received supports from the government for early establishment of oil palm plantations. When the program and the support were gradually reduced, farmers continued the adoption independently. Previous literature mentions that higher profit per head of labour working in oil palm plantations and the possibility to add income from off farm activities are some reasons of the farmers’ fast adoption. However, if farmers only seek for higher profits than what they already received from agroforest, converting part of the agroforest to a rubber monoculture should be a safer choice than establishing oil palm plantations. Rubber has been cultivated longer. Hence, the farmers have prior knowledge of rubber cultivation. Moreover, rubber monoculture has higher returns per hectare than oil palms. Thus, it seems that the adoption also reasoned by an intention to cultivate two crops. We analyze this crop adoption with the underlying hypothesis that farmers’ risk attitudes and time preferences affect crop-diversification. Our findings show that risk-averse farmers prefer to cultivate both crops. Prior knowledge about the direction and strength of farmers’ risk attitudes and discount rates is important in technology adoption. The policymaker can use this knowledge to plan informed future policies supporting technology adoption. Risk aversion and high discount rates inhibit farmers from participating in innovations and trap them in poverty. The third paper presents the risk attitudes and time preferences of farmers from India and Indonesia and compares them. Our finding shows that Indian farmers have a higher level of risk aversion compared to Indonesian farmers, but farmers from both countries show extremely high discount rates compared to results from studies in other countries.
Keywords: discount rates; experimental economics; farmers; Indonesia; oil palm; risk attitude; social dilemma experiment