Identification of returns to new technologies under distinctive econometric approaches

Abstract

ABSTRACT This article uses distinctive econometric models to investigate returns to new technologies and whether adoption decisions can be explained by comparative advantage. I consider three models: static and dynamic panel models of homogeneous returns to fertilizer, as well as the correlated random coefficient model of heterogeneous returns. I discuss both the benefits of using each of the models and their interpretations. I then use data from cocoa farming in Ghana to identify the returns to fertilizer by means of these three models. The estimated average returns in different models are positive, high and strongly significant statistically. I also find evidence of heterogeneous returns to new technology based on comparative advantage. My overall results suggest that adoption of new agricultural technologies may not necessarily benefit all farmers, and the adoption decision may be crop-specific, context-specific or technology-specific.