Technology Adoption Under Uncertainty: Take-Up and Subsequent Investment in Zambia

Abstract

Many technology adoption decisions are made under uncertainty about the costs or benefits of subsequent investments in the technology after the initial take-up. As new information is realized, agents may prefer to abandon a technology that appeared profitable at the time of take-up. Low rates of follow-through (engagement in subsequent investments) are particularly problematic when subsidies are used to increase adoption, in part because they may attract users with a lower value for the technology. We use a field experiment with two stages of randomization to generate exogenous variation in the payoffs associated with taking up and following through with a new technology: a tree species that provides private fertilizer benefits to adopting farmers. Our empirical results show high rates of abandoning the technology, even after paying a positive price to take it up. The experimental variation offers a novel source of identification for a structural model of intertemporal decision making under uncertainty. Estimation results indicate that the farmers experience idiosyncratic shocks to net payoffs after take-up, which increase take-up but lower average per farmer tree survival. We simulate counterfactual outcomes under different levels of uncertainty and observe that subsidizing take-up of the technology affects the composition of adopters only when the level of uncertainty is relatively low. Thus, uncertainty provides an additional explanation for why many subsidized technologies may not be utilized even when take-up is high.

Optimal Contracts for Experimentation

“…The contract form used in Jack et al (2014) shares features with what emerges as an optimal contract in our model, and their basic findings are also consistent with our results. Their controlled experiment is simple in that performance is assessed and a reward is paid only at the end of one year.…”

“…Our results may inform the design of experimental work, particularly with regards to dynamic considerations, which are receiving increasing attention. For example, Jack et al (2014) use a field experiment to study both the initial take-up decision and the subsequent investment (follow-through) decisions in the context of agricultural technology (tree species) adoption in Zambia. The authors consider simple contracts to investigate the interplay between the uncertainty of a technology's profitability, the self-selection of farmers, and learning of new information.…”

Self-selection into payments for ecosystem services programs

“…(As emphasized in ref. 11 but ignored in the current exercise, landholders may also face considerable uncertainty in both the costs and benefits of tree survival at the time they make their enrollment decision. We also assume that a landholder is only paid if she complies with the program, which may not be the case if monitoring or enforcement is imperfect.)…”

Cash for Carbon: A Randomized Controlled Trial of Payments for Ecosystem Services to Reduce Deforestation

“…The paper is also related to recent randomized evaluations of tree-planting programs (Jack, 2013;Jack et al, 2015) and other studies on forest conservation in developing countries (Foster and Rosenzweig, 2003;Edmonds, 2002;Somanathan, Prabhakar, and Mehta, 2009;Burgess et al, 2012;Alix-Garcia et al, 2013;Assunção et al, 2014). More broadly, we contribute to the literature in economics on environmental issues in developing countries (Greenstone and Jack, 2015).…”