Does exposure to weather variability deter the use of productivity‐enhancing agricultural technology? Evidence from Ethiopia

Abstract

AbstractThis study examines how farm households' decision to use modern agricultural inputs is influenced by the weather variability using a household panel survey merged with long‐term historical weather data from Ethiopia. As a part of an effort to fill methodological gaps that are observed and anticipated in previous similar literature, this study employs a more flexible modeling approach under a multiagricultural technologies framework. Findings suggest that weather uncertainty reduces the probability and intensity of adoption of productivity‐enhancing inputs, including chemical fertilizer and improved seed. The average partial effect for rainfall variability indicates that each additional percent of coefficient of variation of precipitation decreases the fertilizer use per hectare by, on average, 2.5%, other factors being constant. Similarly, a 1% increase in rainfall variability is associated with on average 0.6% and 4.5% decrease in probability and extent of improved seed use, respectively. We also observe that abundance rainfall during the previous production period increases the use of yield‐enhancing inputs in the current growing season. On the other hand, we observe that variability in rainfall increases the probability of the adoption of loss‐reducing agricultural technology, such as irrigation. Findings also indicate that by deterring their incentive to invest in productivity‐enhancing agricultural inputs, weather risk could confine uninsured farming households in a low productivity‐low income trap. Results also highlight the importance of policy interventions aiming to improve the risk‐bearing capacity of smallholder farmers in encouraging investment in productivity‐enhancing technologies.