Abstract
Abstract Low levels of investment into modern technologies, and limited use of measures that have low monetary cost but the potential for high yields, are often regarded as obstacles to further agricultural development. This paper investigates farmers’ demand for one such measure, namely agricultural advisory services. These have modest (most frequently zero) monetary user cost but, according to some recent research, have the potential to result in large increases of yields. Yet demand for these extension services is often low. We propose that costly attention may be part of the explanation for this. In our model, advisory services are available free of charge, but positive effects on production are only realized if farmers devote attention to listening to and implementing the provided advice. Modeling farmers as rational decision makers facing scarce attention, we identify the circumstances under which farmers may optimally abstain from demanding advisory services. The model complements the insights of other theories commonly used to explain suboptimal farm decisions and outcomes, and generates testable predictions, which are consistent with empirical evidence based on a large farm-level panel dataset from Sub-Saharan Africa.
Highlights
Increases in productivity are key to growth and poverty reduction, yet productivity in many domains is lacking far behind technological possibilities
The fairly low interest in agricultural advice despite the apparent potential for high returns is puzzling in light of the low monetary user cost associated with receiving such advice
Given that participation in extension programs is only worthwhile if farmers devote sufficient attention to listening to and implementing the provided advice, the decision to request extension services will depend on the amount of attention that farmers are willing to devote to their agricultural production process
Summary
Increases in productivity are key to growth and poverty reduction, yet productivity in many domains is lacking far behind technological possibilities. One particular theoretical result, which is helpful in distinguishing the proposed channel from other theories commonly used in the literature to explain suboptimal farm decisions and outcomes, is that shocks in the non-agricultural domain may increase demand for agricultural advice. This prediction runs counter to much of the recent literature on psychology and poverty (e.g., Banerjee and Mullainathan, 2008; Haushofer and Fehr, 2014), according to which negative shocks in the non-agricultural domain would tend to absorb cognitive bandwidth, leading to less attention paid to agricultural production and less use of agricultural advice.
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