Agricultural Technology Adoption and Rural Poverty: Application of an Endogenous Switching Regression for Selected East African Countries

Abstract

Achieving agricultural growth and development and thereby improving rural household welfare will require increased efforts to provide yield enhancing and natural resources conserving technologies. Agricultural research and technological improvements are therefore crucial to increase agricultural productivity and thereby reduce poverty. However evaluation of the impact of these technologies on rural household welfare have been very limited by lack of appropriate methods and most of previous research has therefore failed to move beyond estimating economic surplus and return to research investment. This paper evaluates the potential impact of adoption of modern agricultural technologies on rural household welfare measured by crop income and consumption expenditure in rural Ethiopia and Tanzania. The study utilizes cross-sectional farm household level data collected in 2007 from a randomly selected sample of 1313 households (700 in Ethiopia and 613 in Tanzania). We estimate the casual impact of technology adoption by utilizing endogenous switching regression and propensity score matching methods to assess results robustness. This helps us estimate the true welfare effect of technology adoption by controlling for the role of selection problem on production and adoption decisions. Our analysis reveals that adoption of improved agricultural technologies has a significant positive impact on crop income although the impact on consumption expenditure is mixed. This confirms the potential direct role of technology adoption on improving rural household welfare, as higher incomes from improved technology translate into lower income poverty.