Template-type: ReDif-Paper 1.0
Author-Name: Nigus, Halefom
Author-Name: Nillesen, Eleonora
Author-workplace-name: RS: GSBE UM-BIC, Maastricht Graduate School of Governance, RS: GSBE MGSoG
Author-Name: Mohnen, Pierre
Author-workplace-name: RS: GSBE other - not theme-related research, QE Econometrics
Title: Does exposure to markets promote investment behavior?
Abstract: This study investigates the effect of exposure to markets on farm households' agricultural investment decisions. We assess whether and how market experience affects farmers' adoption of risky but profitable technologies and explore the role of plausible demand-side barriers therein. Specifically, we hypothesize that risk preferences and locus of control change with market experience and as such may explain the relationship between market experience and investment decisions. We use surveys and incentivized experimental data, collected from the Tigray regional state of Ethiopia and use an Endogenous Switching Probit and IV-Probit models to attenuate endogeneity issues. Our findings suggest, first, that market exposure induces farmers to adopt agricultural technologies, such as chemical fertilizer, improved seeds, manure, and row planting and second, that market experience attenuates risk aversion and, although less robustly so, leads to a more internal locus of control. Policies to in  crease farmers' investments may thus not be confined to providing access to technologies and information but should perhaps be complemented with interventions that attend to lowering psychological barriers.
Classification-JEL: c93,g22,h41,o17
Series: UNU-MERIT Working Papers
Creation-Date: 20230814
Number: 2023-028
File-URL: https://cris.maastrichtuniversity.nl/ws/files/146083143/wp2023-028.pdf
File-Format: application/pdf
File-Size: 793042
Handle: Repec:unm:unumer:2023028
DOI: