Quantifying Externalities in Technology Adoption: Experimental Evidence from Ugandan Farmers

I investigate how positive externalities contribute to under-adoption of agricultural technology among sub-Saharan African farmers. Understanding whether and which types of externalities affect adoption is important both to shed light on human behavior and to formulate optimal policies regarding subsidies and targeting. I focus on the adoption of pest-control technologies. A farmer can benefit in two ways if another adopts: i) she can learn about the technology, a knowledge externality and ii) she can face a lower infection probability, a contagion externality. My approach develops in four steps. First, I measure the value farmers attach to adopting pest-control technologies, and establish that pest-control technologies are desired. Second, I measure the value a farmer attaches to another farmer adopting pest control technologies, and document that farmers anticipate positive spillovers. Third, I show that farmers are responsive to changes in positive externalities. I generate random variation in a farmer's beliefs over knowledge and contagion externalities and find changes in beliefs affect the value she assigns to others' adoption. Finally, I estimate that the private benefit of technology adoption is lower than the cost of the technology, but the social benefit is larger than the cost. My results support the view that local economies may be caught in a low-adoption equilibrium which hinders agricultural productivity growth.

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