Further adoption of fertiliser and improved seeds are key to increased land productivity in Ethiopian agriculture. However, as in much of sub-Saharan Africa, the adoption and diffusion of such technologies has been slow. While supply side factors undoubtedly play a role, in this paper Pramila Krishnan and Manasa Patnam concentrate on the possibility that imperfect information about the returns to new technology explains low adoption rates. They data from the Ethiopian Rural Household Survey between 1999-2009 to examine the role of learning from others for the adoption and diffusion of improved seeds and modern inputs. They also contrast learning from extension agents with the role of neighbours. Examining this question presents difficult analytical problems to identify these effects. Krishnan and Patnam use the decisions of the neighbours of neighbours to instrument for adoption in the neighbourhood, while first difference estimation controls for some of the endogeneity linked to non-random placement of extension visits.
The findings suggest that in 1999, both learning from neighbours and extension were potent factors in explaining adoption of improved seeds and fertilizer. By 2009, the contribution of extension has declined considerably for both seed and fertilizer adoption, while di¤usion via neighbours remains similarly potent to before. Fixed effects estimation suggests that the impact from extension may have been small for seeds, and of limited relevance to fertiliser adoption. A further exploration of the marginal benets suggests that for seeds, learning from others will remain a potent force: the speed of diffusion of improved seed through learning from others is likely to continue to increase until local diffusion levels of about 75 percent have been reached, but for fertiliser, these benefits from learning appear to tail off once about 40 percent diffusion has been reached. The marginal benefits of further extension visits were initially high for fertiliser but were always low for seed. They have become much lower over time, and tail o¤ quickly with diffusion, especially for fertiliser. Even though extension visits have clearly increased over time, in line with the expansion of these services throughout the country, they are unlikely to contribute to a rapid di¤usion of these technologies.