Socio-economic analysis of farmers facing asymmetric information in inputs markets: evidence from the rainfed zone of Pakistan

Abstract

Information asymmetry plays an important role in the non-adoption of modern agricultural inputs like improved seeds, pesticides and fertilizers etc. Therefore, this study investigated the role of farmers’ socio-economic attributes and farm level characteristics in avoiding asymmetry of information in agricultural input markets (i.e. exaggerated prices and low quality). The approach captures the farm level heterogeneity and complexity that may help the authorities in strengthening existing market regulations to control price and quality disparities. We analysed 395 randomly selected farm households using multinomial logit model. We found that farmers with large landholding size are less likely to face quality and more likely to face price information asymmetry. Farmers with higher education, more physical assets and better access to other sources of information are less likely to face both quality and price information asymmetry. Borrowers as compared to purchasers are more likely to face information asymmetry on prices of agricultural inputs. Non-adopters of improved agricultural technologies are more suspicious of information asymmetry than adopters. The paper thus provides evidence that the socio-economic dynamics of information asymmetry can have an important influence on wide spread adoption of technology. Paying more attention to farm level heterogeneity and complexity would help to develop general market management plan and improve the adoption of technology by farmers.