Farmers’ Willingness to Pay for Improved Agricultural Technologies: Evidence from a Field Experiment in Tanzania

Apurba Shee,Carlo Azzarri,Beliyou Haile

doi:10.3390/su12010216

Abstract

Initiatives on the sustainable intensification of agriculture have introduced improved technologies tailored to farmers’ local conditions by trial demonstration with free provision of improved seeds and fertilizers. It is not clear, though, whether smallholder farmers would be willing to pay for these technologies, and what factors determine their informed demand. Using a contingent valuation experiment, combined with information at baseline among 400 households in Northern Tanzania, this study measured farmers’ willingness to pay (WTP) for hybrid maize seed and local inorganic fertilizer. Farmers’ WTP was estimated using a dichotomous contingent valuation with follow-up model. Results showed that the average WTP was 61% higher for hybrid maize seed, and 15% lower for inorganic fertilizer, than their respective average local market prices during the reference period, suggesting that farmers were willing to pay a premium for hybrid maize seed, while they did not seem to be interested in fertilizer purchase at current market price. Moreover, since improved access to extension services was found to positively affect farmers’ WTP, strengthening extension services could be a suitable policy intervention to increase farmers’ demand for improved technologies. On the other hand, farmers’ risk aversion was negatively correlated with WTP for both technologies. This result suggests that encouraging risk reduction options, such as agricultural insurance, could be a useful policy strategy for boosting farmers’ demand for improved agricultural technologies.

Highlights

Smallholder households in Sub-Saharan Africa (SSA) are overwhelmingly dependent on agriculture that has shown little productivity improvement until the last century
We investigated the determinants of willingness to pay (WTP) for hybrid maize seed and inorganic fertilizer, including the role of farmers’ risk aversion
While most contingent valuation (CV) studies in developing countries have focused on consumer preferences [24], our work focused on producers’ preferences in a developing country context, contributing to limited existing applications of CV in these settings

Summary

Introduction

Smallholder households in Sub-Saharan Africa (SSA) are overwhelmingly dependent on agriculture that has shown little productivity improvement until the last century. A viable policy option to increase agricultural productivity is through the increased adoption of improved agricultural technologies, including hybrid seeds and fertilizers. More than 6 billion US dollars were committed to support the region’s smallholder agriculture sector as of 2009, with the largest share (43%) devoted to the direct provision of agricultural inputs or training [6] In their synthesis of input subsidy programs across ten African countries, Jayne and Rashid [7] found expenditures on these programs to account for more than 30% of total public spending on agriculture. This study elicited farmers’ WTP for improved seed and fertilizer among smallholders, through a stated preference-based contingent valuation (CV) experiment conduced in 2015.

Willingness to Pay and Contingent Valuation of Agricultural Technology

Econometric Framework

Empirical Results

Conclusions and Implications