Pricing and Allocation of  New Agricultural Technologies (Job Market Paper)

Paper: available here

World Bank Development Impact Blog post: available here

VoxDev article: available here

This study uses a two-stage experiment to examine whether lower prices allocate new agricultural technologies to farmers with lower returns. In stage one, I randomize a price subsidy, ranging from full to zero subsidies, for a new wheat seed variety. In stage two, I randomize free distribution across the self-selected sample of non-buyers from stage one. This design allows me to compare treatment effects across the entire population with treatment effects among the sample choosing not to buy the seed. If higher prices screen out farmers with low willingness to adopt, then the effect of stage-two free distribution on adoption by non-buyers should be trivial. Instead, I find that the stage-two free distribution increases adoption and wheat cultivation by an amount almost equal to the effect from stage one. In addition, farmers choosing not to buy in stage one do not realize lower returns to adoption  -- despite there being substantial heterogeneity in returns across the sample. A potential mechanism for explaining the results is that binding credit constraints prevent some farmers from buying in stage one. Free distribution in stage two selects in farmers who are credit constrained but do not have systematically lower returns to adoption. Taken together, these findings imply that policy makers who aim to increase dissemination of agricultural technologies cannot rely on market prices as a mechanism for targeting high return farmers.