Abstract
Policy instruments used to stimulate agricultural output without penalizing the urban consumer are examined. Three categories of instrument variables are considered: a traditional instrument, credit policy; policies to affect risk through reduction in the income variance; and, finally, increased information to improve perception of the distribution of returns from new technology. A model of adoption of sorghum varieties is used to analyze the relative importance of these instruments on the decisions of small farmers in N.E. Brazil. The model indicates that new technology, appropriate for the farmers and the region, should be adopted by farmers highly averse to risk even with an overestimation of the variance of the returns. For nonadopters, improved estimates of the distribution of returns will occur over time as their neighbours adopt and they obtain more information on the new technology. Crop research programmes may need to consider several alternative technologies, as the model results for the sorghum technology adopted were highly influenced by the farmer's risk-aversion coefficient.ADDITIONAL ABSTRACT:Of the several methods which may be used in aiming agricultural development at the small farmers, three factors are examined: credit policy; development and adoption of new technology; and increased information available to the small farmer. A model was constructed using these three factors, and data from semi-arid northeast Brazil was tested. The object was to introduce climatically better suited sorghum into the region in which corn is presently the main crop. The model findings, which were not field tested, show that the new sorghum technology will be adopted partially by a limited number of farmers who are least averse to risk-taking. Credit policy had little to do with the decisions. It is expected that from this foothold, sorghum cropping would spread as other farmers became convinced by the successful adoption of sorghum by their neighbors.
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