Joint Estimation of Technology Adoption and Land Allocation with Implications for the Design of Conservation Policy

Abstract

One challenge to estimating the parameters of a technology adoption model is that technology is selected jointly with land allocation. The article estimates a nested logit model of technology and crop choices that accounts for unobserved correlation among decisions. Estimation is conducted with a data set of adoptions, in contrast to the more common approach of using cross‐section observations of existing technologies. Estimation results support the choice of a nesting structure as opposed to a more standard multinomial logit model. Adoption of precision irrigation technology is shown to be more sensitive to financial incentives affecting input price and technology cost than suggested by previous studies.