Farmers’ Willingness to Pay for Improved
Agricultural Technologies: Results from Field
Experiment Babati, Tanzania
Apurba Shee, Carlo Azzarri and Beliyou Haile
AR-ESA Annual Meeting July 1 2016, Dar es Salaam
Outline
 Introduction and objective
 Experimental design and survey
 Econometric framework
 Empirical results
 Concluding comments
Introduction and objective
 Promotion of sustainable intensification of agriculture,
introduces improved technologies such as improved seeds and
fertilizers
 But it is not clear whether small holder farmers would be willing
to pay for these technologies, and what factors determine their
informed demand for technologies
 This study elicits willingness to pay (WTP) using stated
preference based contingent valuation (CV) experiment
conducted with 400 households in Tanzania
 Most contingent valuation studies in developing countries have
focused on consumer preferences (Durand-Morat et. al 2016)
Limited research on producers’ preferences
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Introduction and objective
 WTP is usually defined as the maximum amount that an
individual would be willing to pay for a good or service without
losing his/her utility
 Since hybrid seed and inorganic fertilizer are marketable goods
and the farmers in the area under investigation were exposed to
these technologies, stated preference approach by doublebounded CV method appears most appropriate
 We follow Hanemann, Loomis and Kanninen (1991) approach,
known as dichotomous CV with follow-up or double-bounded CV
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Experimental design
Econometric framework and results
WTPi ( zi , ui )  zi'   ui
  t 2  z'
ln L   ln  
G1
  
  t1  z ' 
  ln  
G3
  

 t1  z ' 


 

 t 2  z '


 


 t 2  z'
    ln 1   
 G 2 
 
  t 2  z '

    ln  
 G 4   






Variables
Estimates
Standard error
Mean WTP for fertilizer
27277.08*
1362.98
Sigma
24779.03*
1305.24
Mean WTP for hybrid maize seed
12933.26*
259.48
Sigma
4511.65*
223.19
* Indicates statistical significance at 99% confidence level
Empirical results
VARIABLES
Household size
Female headed household
Age of the head
Years of education of the head
No of working age laborers
Total land size (Ha)
Yield of maize(kg/ha)
Total wealth index
Constant Relative Risk Aversion
Credit constrained households
AR beneficiary
Coupon household
Awareness
Time to closest daily market
Distance to nearest supplier
Constant
Sigma
No of observation
Standard errors in parentheses
WTP for
fertilizer
WTP for
Hybrid maize seed
985.3
60.38
(643.3)
(127.0)
-3,187
-30.46
(4,769)
(930.5)
83.13
-3.605
(126.2)
(24.82)
1,133**
93.05
(562.7)
(109.0)
-1,474
-88.53
(992.6)
(197.2)
912.9
161.7
(1,114)
(233.8)
1.555*
0.00577
(0.916)
(0.181)
2,863
41.61
(1,841)
(358.3)
-8,441**
-2,356***
(4,436)
(893.7)
1,291
145.5
(3,128)
(636.1)
-2,363
-105.5
(3,404)
(680.4)
5,273*
649.2
(2,987)
(598.8)
5,945*
1,026
(3,378)
(687.7)
-70.17
6.743
(55.25)
(10.41)
-0.604
-15.40**
(31.97)
(6.443)
13,714
14,036***
(10,987)
(2,170)
22,939***
4,374***
(1,286)
(235.4)
400
400
*** p<0.01, ** p<0.05, * p<0.1
Concluding comments
 The average WTP is found to be 61.6% higher for hybrid maize
seed and 14.7% lower for inorganic fertilizer compared to their
average market prices locally available in 2013
 Education of household head, maize productivity and extension
services are found to influence farmers’ WTP positively, whereas
farmers risk aversion preferences and distance to nearest supply
market have a significant negative influence
 Considering the finding that farmers risk preferences influence
WTP negatively, it would be important policy recommendation
to introduce agricultural insurance or other risk mitigating
instruments to boosting farmers demand for improved
agricultural technologies
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