Practice Job Talk: The Farmer and The Fates: Locus of Control and Investment in a Stochastic Production Process

• Development Workshop

Date and Location

Tuesday, October 16, 2018, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Economists and policy makers alike often find themselves struggling to explain low levels of adoption for seemingly profitable agricultural technologies. This easily extends to technologies that stabilize yields in the face of weather and pest pressure. This paper takes a behavioral approach to explaining adoption and investment rooted in the psychological notion of locus of control. Locus of control refers to the extent to which a decision-maker believes that her actions determine outcomes relative to forces outside of her control. A small but consistent literature has begun to relate locus of control to economic behavior, albeit in its most general form. Drawing on more refined, activity specific notions of locus of control from the psychology literature, I develop a theoretical model demonstrating that locus of control affects the perceived returns to investment under conditions consistent with a broad range of investment activities. I then use primary data on the adoption of improved maize varieties by smallholding farmers in Eastern Africa to study the relationship between locus of control and investment empirically. I develop an instrument for eliciting activity specific locus of control in maize production and show that households attributing a greater share of variability in maize harvest to external forces are significantly less likely to adopt improved maize varieties. These results are strengthened by considering heterogeneous impacts of a randomized marketing intervention promoting drought-tolerant maize varieties and satellite-based index insurance.