Signals, Similarity and Seeds: Social Learning in the Presence of Imperfect Information and Heterogeneity

• Agricultural Economics Workshop
• Development Workshop

Date and Location

Monday, November 10, 2014, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

Inducing poor households below the technological frontier to adopt improved technologies is widely recognized as a key issue in raising productivity in developing countries. Social networks may help companies and institutions spread information about innovations and are increasingly thought of as a viable complement to more traditional methods such as extension services in the case of agricultural technologies. This paper examines the influence of social networks on knowledge about and adoption of a new agricultural technology in rural Kenya. Taking advantage of experimental variation in the information available to farmers through their social networks, we find that networks affect farmers’ familiarity with the new technology, their willingness to pay for the product, and their likelihood of adopting it. However, by examining how village-level variability in soil quality (unobserved to the farmers) influences social network effects, we show that unobserved heterogeneity makes individuals less likely to respond to their peers’ experiences. This finding suggests that the extent to which social networks can be relied upon to transmit information depends on the information environment in which individuals operate. Policies that attempt to leverage social learning therefore need to take into account the complex learning process that farmers face.