The adoption of agricultural technologies issue is an important factor in the welfare level of farmers, agricultural productivity, and food economics. In their study, Chavas and Nauuges have examined the factors affecting the benefits of technology adoption for farmers and their relationship with the innovation process. They have reviewed the issue of technology adoption by focusing on the role of uncertainty and learning elements, and have explained the welfare consequences of this issue for both farmers and consumers.
Innovation and adoption of it
Innovation has been an important part of the economic development process. Technological progress has a major contribution to improving productivity and revenue growth. This can be seen in agriculture. Increasing the world’s population has increased the demand for food and has raised the need for innovations to increase food production and nutrition in the growing human population. This challenge began with the emergence of agriculture and is critical to this day. In general, the decision to adopt is part of a general process of innovation that begins with the discovery of new knowledge of how to use resources in the production of goods and services. Innovations are adopted because they create some of the perceived benefits. But the nature and extent of these benefits can vary in different individuals and situations. In view of this, 4 cases will be controversial:
4 Cases
First, by definition, the new technology is not fully known or not understood sooner. Therefore, the perceived benefits of innovation depend on the information available to each decision-maker. Second, the perceived benefits of innovation can depend on the economic environment. Therefore, changing economic conditions over time and place can affect the dynamic and spatial patterns of technology adoption. This emphasizes the need to understand the factors affecting the benefits of adoption and link them to the innovation process. Third, knowing that positive benefits are needed to stimulate technology adoption has led to the “inducted innovation hypothesis”. The induction innovation hypothesis states that innovations are likely to be implemented when they reduce the lack of current resources. In a market economy, this means that innovations occur when they save expensive goods and stimulate the use of cheap goods. Fourth, the benefits of innovation can change over time. Early adopters of the new technology are usually motivated for the direct benefits they can obtain from an innovation. But widespread acceptance affects markets and prices and has induction impact on all participants in the market. While the overall consumer welfare usually improves, the process of technological changes can have significant distribution effects. Such effects depend on the interaction between individuals, knowledge, markets, economic institutions and politics. Understanding the evolution of innovations is an important aspect of the economic analysis of technological change in agriculture.
The challenge the farmer is facing:
Agriculture is a risky business and many factors affect its final results. Concerning the technology issue, the two challenges the farmer face is the subject of uncertainty and learning. The subject of uncertainty can be explained that each farmer has different quality sources of his counterpart. The risk of using technology is that the use of a particular technology in different samples creates the same value added? Given the costs to be paid to update existing technologies, will change the volume and quality of the products will ultimately be affordable compared to the costs paid? The next challenge is the learning of the farmer. In general, the subject of learning is achieved in two ways of personal experience (learning by doing) and learning from others (communicating with other farmers) for farmers, and it is obvious that this ability is different in each farmer. Since innovations cause uncertainty, access to information on the fit and profitability of the new technology may play an important role. Over time, farmers usually collect information from their experiences, from their counterparts through social networks and/or by observing the initial recipients. In general, while learning can be used for all technologies, social learning is especially related to those who are late and have more opportunities to learn from others. There is extensive literature that describes the phenomenon of social learning.
Does the farmer adopt new technologies?
For a given farmer, if it becomes obvious that a new technology can makes a positive net profit in his business, it will definitely use it. Whether it is an industrial farm or smaller and personalized farms for a living. Proper technologies in industrial fields reduce the cost of output production or increase the output compared to the ratio of primary resources. For personal farms, it also increases food supply and reduces the risk of food insecurity. In all cases, innovations are the source of improving productivity in agricultural households and agricultural sector. Over time, agricultural productivity in most countries has increased sharply. Agricultural innovations have been numerous and important and have reinforced the major food production. Over the past century, genetic improvement has contributed to a significant increase in agricultural productivity. Notable examples include hybrid corn, “Green Revolution” and biotechnology revolution.
What are the welfare effects of technology in agriculture?
The welfare effects of new technology can be complex. Farmers usually consider market prices in accordance with data. In this regard, the key issue for the initial adopters is whether a new technology improves productivity. In the market economy, this means reducing costs and increasing farm profits. When new technologies are widely used, they affect markets and prices. Typically, for a given source, improved technologies help increase supply and put down the downward pressure on production prices. The magnitude of these induced price effects depends on the price elasticity of demand. When the output demand is price inelastic, the induced price reduction can be substantial. The expansion of supply due to the technical progress in agriculture puts a significant downward pressure on food prices and has two consequences:
The first consequence is that the presence of technology increases the volume of production and ultimately the supply of more products. This will reduce the price of products and increase the welfare of consumers. Its prominent example is visible in 2012. But this will reduce the profitability of farmers because in the competitive market they have to sell their products at a lower price. This is more intense in domestic markets, so it is suggested that these farmers export some of their crops to other climates whose product prices are higher to achieve more added value.
Last words
Technology adoption in agriculture is an important way to increase farm productivity and improve food security around the world. However, the adoption process is usually in heterogeneous fields and areas and causes heterogeneity. However, the acceptance process is usually in heterogeneous fields and areas and causes heterogeneity welfare effects. While consumers benefit when improved technology helps lower food prices, demand for food shows that technological changes can have adverse effects on agricultural profitability and farmers’ welfare. When productivity growth reduces the price of agricultural commodities, it emphasizes the role of local research that can help farmers in any country or region compete with farmers in other countries or areas.
For further reading, see the article “Uncertainty, Learning, and Technology Adoption in Agriculture” written by Chavas and Nauuges.
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Doi: 10.1002/aepp.13003
Link: https://onlinelibrary.wiley.com/doi/abs/10.1002/aepp.13003
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