Abstract:

This paper investigates the empirical linkages between production risk and technology adoption decisions among agricultural farmers in Tanzania and Uganda using a balanced household panel dataset from the World Bank’s LSMS-ISA project. Applying a momentbased approach and a MundlakChamberlain IV fixed effects model to control for endogeneity and unobserved heterogeneity, I find that the first four moments of production significantly explain changes in the probability of adopting chemical fertilizer, improved seeds, and pesticides. While the use of these modern inputs is found to be riskdecreasing, estimates suggest that the higher their purchasing costs, the greater the cost of farmers’ private risk bearing.