Technology Adoption in the Presence of Constraints: the Case of Fertilizer Demand in Ethiopia

Abstract

Using a nationally representative dataset, and information on why farmers did not purchase fertilizer, the authors estimate a double–hurdle fertilizer adoption model for Ethiopia. Access is an overriding constraint in four zones. Credit is shown to be a major supply–side constraint, suggesting that household cash resources are generally insufficient to cover fertilizer purchases. On the demand side, household size, formal education of the farmer, and the value–to–cost ratio have the largest impact on adoption and intensity of fertilizer use. The results underline the importance of increasing the availability of credit, developing labor markets, and reducing the procurement, marketing and distribution costs of fertilizer. The authors conclude that current large–scale transport, health, and education investment programs will positively impact smallholder productivity and household welfare. The price sensitivity of farmers suggests that an urea subsidy could be useful in redressing the nutrient imbalance currently observed in Ethiopia.