“Risk, Ambiguity and the Adoption of Innovations”

Next Wednesday, May 27th, at 2.00pm, the NOVAFRICA Center welcomes Paulo Santos, from Monash University to present his work on risk aversion, ambiguity and the adoption of innovations in agriculture.

Tim Capon, Nicholas Ross and Paulo Santos

The slow adoption of innovations in less developed countries has long been a puzzle, given the high expected returns. This paper investigates the role of ambiguity-aversion as a fundamental behavioral determinant of technology adoption, motivated by the fact that, almost by definition, farmers have less certain information about the outcomes of new technologies compared with traditional technologies. Using primary data from field experiments used to measure behavioral parameters such as risk and ambiguity aversion, we find that farmers’ aversion to ambiguity (but not risk aversion) limits the adoption of new technologies, even when expected profits are quite high. Interventions that reduce uncertainty (in place of interventions that reduce risk) seem a promising way of speeding up the adoption of innovations.

For further information see here.