CHAPTER VII: MODELLING ADOPTION OF SOIL FERTILITY MANAGEMENT AND CONSERVATION PRACTICES

Transcription

1 CHAPTER VII: MODELLING ADOPTION OF SOIL FERTILITY MANAGEMENT AND CONSERVATION PRACTICES Ths chapter descrbes the approach adopted by the study to model adopton of sol fertlty management and sol conservaton practces by smallholder farmers n the Central hghlands of Ethopa. The frst secton presents the analytcal framework and the emprcal models are specfed n secton two. The last secton descrbes the factors hypotheszed to nfluence adopton behavor of smallholder farmers. 7.1 Analytcal framework The decson whether or not to use a new technology could be consdered under the general framework of utlty or proft maxmzaton (Norrs and Bate, 1987; Pryanshnkov and Katarna, 2003). It s assumed that economc agents ncludng smallholder subsstence farmers use a technology only when the perceved utlty or net beneft from usng a technology s sgnfcantly greater than would be the case wthout the technology. Whle utlty s not drectly observed the actons of economc agents are observed through the choces they make. Suppose that Y j and Y k represent a household s utlty for two choces, whch could be denoted by U j and U k, respectvely. Followng Green (2000) and Pryanshnkov and Katarna (2003) the lnear random utlty model could be specfed as U j β + ε = ' j X j and U k β K X + ε K = ' (7.1) where U j and U k are the perceved utlty of technology j and k, respectvely, X s a vector of explanatory varables that nfluence the perceved desrablty of the technology, β j and β k are parameters to be estmated and ε j and ε k are the error terms, assumed to be ndependently and dentcally dstrbuted. In case of sol fertlty and sol conservaton technologes, f a household decdes to use opton j on the th plot, t follows that the 146

2 perceved utlty or beneft from opton j s greater than the utlty from other optons (say k) depcted as: U j ' ' ( β X + ε ) > U ( β X + ε ), k j (7.2) j j k k k The probablty that a household wll adopt opton j among the set of sol fertlty and sol conservaton practces could then be defned as: P Y = 1 X ) = P( U j > U ) (7.3) ( k ' ' = P( β X + ε β X ε j j k k > ' ' = P( β X β X + ε ε j k j k > * * = P( β * X + ε > 0 X = F( β 0 X ) 0 X ) X ) where P s a probablty functon, U j, U k and X as defned above, * ε = ε j ε k s a * ' ' random dsturbance term, β = ( β j β k ) s a vector of unknown parameters whch can be nterpreted as the net nfluence of the vector of ndependent varables nfluencng * * * adopton, and F( β ) s the cumulatve dstrbuton functon of ε evaluated at β X. X The exact dstrbuton of F depends on the dstrbuton of the random dsturbance term, * ε. Dependng on the assumed dstrbuton that the random dsturbance term follows, several qualtatve choce models such as a lnear probablty model, a logt or probt models could be estmated (Pndyck and Rubnfeld, 1997; Green, 2000). Qualtatve choce models are useful to estmate the probablty that an ndvdual wth a gven set of attrbutes wll make one choce rather than an alternatve (Pndyck and Rubnfeld, 1997; Green, 2000). Of the three functonal relatonshps often specfed, the lnear probablty model s computatonally smpler and easer to nterpret parameter estmates than the other two models. However, ts specfcaton creates estmaton problems nvolvng the applcaton of ordnary least squares (OLS) such as heteroscendastcty error terms, predcted values may fall outsde the (0,1) nterval, and non-normal dstrbuton of the 147

3 error term. Although, transformaton could provde homoscedastc dsturbance terms and then apply weghted least square procedures, there s no guarantee that the predcted values wll le n the (0,1) probablty range. These dffcultes wth the lnear probablty model compelled econometrcans to look for alternatve model specfcatons (Pndyck and Rubnfeld, 1997; Green, 2000). The two most popular functonal forms used n adopton modellng are the probt and logt. These models have got desrable statstcal propertes as the probabltes are bounded between 0 and 1 (Pndyck and Rubnfeld, 1997; Green, 2000). Apparently, adopton models could be grouped nto two broad categores based on the number of choces or optons avalable to economc agents (Pndyck and Rubnfeld, 1997; Green, 2000). In a settng where there are only two technologcal choces or optons desgnated by J =1 f agent adopts and J =0 otherwse would gve rse to bnomal adopton models whereas choce sets wth more than two alternatves would gve rse to multnomal adopton models. As noted earler, smallholder farmers n the hghlands of Ethopa use a mx of sol fertlty management and sol conservaton practces. However, most prevous technology adopton studes n the country focusng on producton technologes dd not gve due consderaton to sol conservaton and sol fertlty management practces albet a few sol conservaton adopton studes by Shferaw and Holden (1998) n the Andt Td area, Central hghlands, Gebremedhn and Swnton (2003) n Northern hghlands and Bekele and Drake (2003) n Eastern hghlands of Ethopa. Most sol fertlty adopton studes n the country focused on norganc fertlzers ether as a component of a package of crop producton technologes treatng the package as a unt or the components of the package as separate unts (Waktola, 1980; Kebede et al., 1990; Yrga et al., 1996; Alene et al., 2000; Dad, et al., 2001; Regassa, 2001). To smallholder farmers, however, commercal fertlzer s one technologcal opton among the menu of sol fertlty management optons avalable. Furthermore, most prevous sol fertlty management studes were lmted by the analytcal methods employed n analyzng the adopton behavor of smallholder 148

4 farmers. Despte the fact that the adopton decson of sol fertlty management nvolves choces among several sol fertlty management decsons makng the adopton decson nherently multvarate, most studes employed bnomal logt/probt and Tobt regresson models to nvestgate the factors determnng the adopton decson and the ntensty of use of norganc fertlzers, respectvely. Bnomal logt and probt models appled at a household or farm level when n fact nput use decsons are made at a plot level (due to non-homogenety of plots managed by households) may not be approprate. Dorfman (1996) ponted out that the use of bvarate models when n fact the adopton decson nvolves a set of several technologcal optons excludes useful nformaton contaned n nterdependent and smultaneous adopton decsons. Furthermore, as has been argued earler, most prevous adopton studes attemptng to model the adopton decson assumed the same explanatory varables nfluence the adopton decson and ntensty of use n a smlar fashon. In other words, most prevous adopton studes assumed a varable that ncrease (decrease) the probablty of use also ncrease (decrease) ntensty of use of a technology. However, Nakuma and Hassan (2003) and Gebremedhn and Swnton (2003) found evdence that the factors determnng the decson to adopt and the factors determnng ntensty or extent of use of a sol conservaton technology mght be dfferent. Smlarly, Katchova and Mranda (2004) showed that farm characterstcs affectng decsons to adopt marketng channels dffer from those affectng decsons regardng quantty, frequency and contract type. Accordngly, recognzng the fact that sol fertlty management and sol conservaton practces nvolve choces among several technologcal optons, ths study, appled a multnomal logt model for dscreet dependent varables nvolvng several choces. The study also recognzed that factors affectng the adopton decson and the ntensty of use of sol fertlty management practces mght be dfferent hence adopted a Tobt model for contnuous dependent varables to model the ntensty of norganc fertlzer and stone/sol bund use by smallholder farmers n the hghlands of Ethopa. Furthermore, takng nto account that smallholder farmers nput use decsons are made at a plot level due to non-homogenety of plots managed by households, the study modeled the adopton decson at a plot level. 149

5 7.2 Sol fertlty and sol conservaton technologes n the study area Accordng to what was dscussed n precedng sectons, n ths study, ncdence of use of sol fertlty management or a sol conservaton practce s measured by the proporton of sample households usng one management practce or a combnaton of practces smultaneously on a plot or parcel of land. Smlarly, ntensty of use of a certan type or mx of sol fertlty management or sol conservaton practces are measured by mean use rates or proporton of crop area under each opton or mx of optons (e.g. amount of norganc fertlzer or length of sol conservaton structures constructed per unt area). The menu of sol fertlty management optons that smallholder farmers n the hghlands could choose from can be categorzed nto two: ntroduced or modern (norganc fertlzers consstng of DAP and Urea) and tradtonal 24 ncludng seasonal fallowng (weedy fallows), crop rotatons nvolvng legume crops, long-term 25 fallowng (gue) and anmal manure. Noteworthy s that these sol fertlty management practces dffer consderably n terms of ther attrbutes, tmng of costs and benefts. Whle anmal manure and norganc fertlzers are productvty enhancng nputs that may be appled at varous ntenstes every year, seasonal fallowng and legume rotatons could be consdered nvestment decsons wth two years of maturty. Smallholder farmers sol fertlty management strateges on a certan plot, therefore, nvolve a choce among these nputs and agronomc practces ether ndependently or n some combnatons. It should be noted that the use of tradtonal sol fertlty management practces unlke norganc fertlzers do not nvolve mmedate cash outlays by the household but requre substantal opportunty costs n terms of foregone output (e.g. seasonal fallowng, plantng less productve legume crops) or requre addtonal famly labor nputs to transport manure. Therefore, the decsons to fallow a certan plot or nclude legumes as rotaton crops nvolve weghng current costs aganst antcpated benefts n the second croppng season. 24 A tradtonal sol fertlty management refers to a technologcal opton that has been well recognzed as a sol fertlty amendment or enhancement practce and used by smallholder farmers for a long perod of tme. 25 The use of long-term fallowng, whch once was the most mportant sol fertlty management practce partcularly n the upper hghlands has now declned due to land shortages and hence ths practce wll not be consdered n ths modelng endeavor. 150

6 Although t s hardly possble to clam that smallholder subsstence farmers actually make margnal calculatons n the lteral sense, t s apparent that a household decdng to fallow a plot (practce chflk) 26 ths year, ncurs costs n terms of foregone output and extra plowngs requred for land preparaton. Lkewse, the decson to plant a legume ths year nvolves weghng tradeoffs between foregong current benefts from plantng a preferred, possbly hgh yeldng cereal crop ths year aganst antcpated productvty mprovements n the followng year as a result of mproved sol qualty due to nvestments n legumes the frst year. It s, therefore, hypotheszed that dfferent factors may condton the use of tradtonal sol fertlty management practces by smallholder farmers. Smlar arguments could also be made on the adopton of norganc fertlzers or the combned use of norganc fertlzers wth a tradtonal practce(s). The decson whether or not to use norganc fertlzer and how much norganc fertlzer to use among other thngs depends on the sol fertlty management practces used the prevous year (whether a plot was fallowed, had manure or planted to a legume) as well as farmer perceptons of norganc fertlzer as a possble substtute or complementary nput to the tradtonal fertlty management practces and nputs. It s therefore hypotheszed that the factors that nfluence the lkelhood and ntensty of use of norganc fertlzer by smallholder farmers may dffer from those that appear to be sgnfcant when several sol fertlty management practces are analyzed as a group. In ths study, therefore, based on the above framework two sol fertlty adopton models are specfed. The frst model focuses on factors determnng the use or non-use of alternatve sol fertlty management practces (both tradtonal and modern) on a cropland (plot). Accordngly, alternatve sol fertlty management optons consdered nclude:. Seasonal fallowng (SF) alone. Legume rotatons (LR 27 ) alone 26 Seasonal fallowng also referred to as chflk or worteb s a tradtonal sol fertlty management practce n whch part of the land s fallowed for one season and used for crop producton the followng season. 27 Legume rotatons refer to the practce of growng legumnous crops such as faba beans and feld peas n the upper hghlands and chck pea, rough pea, lentl and faba bean n md hghlands n rotaton wth other crops (non-legumnous). 151

7 . Anmal manure (AM) alone v. Anmal manure n assocaton wth SF v. Anmal manure n assocaton wth LR v. Inorganc fertlzer (IGF) alone v. Inorganc fertlzer n assocaton wth optons one, two or three (IGF+SF/LR/AM) v. Contnuous croppng wthout any sol fertlty amendment practce (no adopton) The second model s targeted at determnng the factors assocated wth the ntensty of norganc fertlzer use among smallholder farmers measured n terms of amount of norganc fertlzer appled per hectare regardless of the use of tradtonal sol fertlty management practces. Sol conservaton practces used on cultvated lands n the hghlands nclude tradtonal dtches (boy), cut-off drans (golenta) and stone and sol bunds. Among these practces, tradtonal dtches, though wdely practced, are consdered more of a producton practce for dranng excess runoff from a plot than a sol conservaton practce and hence excluded from further consderaton. Sol and stone bunds constructed by plng earth mounds and rocks (stones), respectvely, are vewed to have smlar effects. The choce of a stone aganst a sol bund largely depends on avalablty of stones n the vcnty. In ths study, therefore, both sol and stone bunds are treated as one category. Lke the case of sol fertlty management, smallholder farmers have to choose from the varous sol conservaton practces. Hence, the approprate econometrc model would be a multnomal adopton model. Accordngly, choce sets consdered n the sol conservaton multnomal adopton model nclude:. The use of tradtonal cut-off drans (golenta) only. Terraces (stone and sol bunds) wth or wth out cut off drans. No sol conservaton practce (no adopton) The models lsted above are presented n the followng sub-sectons. 152

8 7.2.1 Multnomal logt models for the adopton of sol fertlty and sol conservaton technologes As ponted above, the choce (dependent) varables: sol fertlty management and sol conservaton practces are dscrete wth J+1 alternatves (j=0, 1, 2 J). The approprate econometrc model would, thus, be ether a multnomal logt (MNL) or multnomal probt (MNP) regresson models. Indeed, both MNL and MNP models estmate the effect of explanatory varables on a dependent varable nvolvng multple choces wth unordered response categores (Dorfman, 1996; Long, 1997; Green, 2000). Multple response (polychotomous) choce models such as MNL and MNP are more desrable compared to ther counterparts of bnomal logt and probt models n two respects (Wu and Babcock, 1998). It allows explorng factors condtonng both specfc management practces (e.g. norganc fertlzer alone, farmyard manure alone, etc.) as well as combnaton of management practces (e.g. ntegrated sol fertlty management such as norganc fertlzer n assocaton wth fallow or legume rotatons). It also takes care of self-selecton and nteractons between alternatve practces. However, the probt counterpart of a MNL model s rarely used n emprcal studes due to estmaton dffcultes mposed by the need to solve multple ntegratons related to multvarate normal dstrbutons (Wu and Babcock, 1998; Pryanshnkov and Katarna, 2003). In ths study, therefore, a MNL specfcaton was adopted to model sol fertlty and conservaton adopton decson behavor of smallholder farmers nvolvng dscrete dependent varables wth multple choces. Let M j be the j th sol fertlty or sol conservaton management technology that a household chooses to use on the th plot. M j could then take the value of 1 f the j th practce or opton s adopted on the th plot, 0 otherwse. The probablty that a household wth characterstcs X adopts technology j on the th plot s specfed as (Green, 2000): x' β e Pj = Pr ob( M j = 1) =, j = 1... J J x' β 1+ e j= 1 (7.4) where β s a vector of parameters whch satsfy ln( P P ) = X '( β β ) (Green, 2000). j k j k 153

9 Unbased and consstent parameter estmates of the MNL model n equaton (7.4) requre the assumpton of ndependence of rrelevant alternatves (IIA) to hold. More specfcally, the IIA assumpton requres that the lkelhood of usng a certan sol fertlty or sol conservaton practce on one plot by a household need to be ndependent of alternatve sol fertlty and conservaton practces on other plots (.e., P P s ndependent of the remanng probabltes). The premse of the IIA assumpton s that of ndependence and homoscedastc dsturbance terms of the basc adopton model n equaton (7.1). Wu and Babcock (1998) ndcated that the IIA assumpton, though, a convenent property wth regard to estmaton mposes a restrcton on farmer behavor. Ths s partcularly true for the study sample where the management decsons made by the same farmer on dfferent plots under hs/her management are unlkely to be ndependent renderng the error terms to correlate. j k The valdty of the IIA assumpton could be tested usng Hausman s specfcaton, whch s based on the fact that f a choce set s rrelevant, elmnatng a choce or choce sets from the model altogether wll not change parameter estmates, systematcally. The statstcs of Hausman s specfcaton s gven by (Green, 2000): 2 χ = ( ˆ β ˆ β )'[ Vˆ s f s Vˆ f ] 1 ( ˆ β ˆ β ) s f (7.5) where s ndcates the estmators based on restrcted subsets, f ndcates the estmator based on the full set of choces, and Vˆ s and Vˆ f are the respectve estmates of the asymptotc covarance matrces. Alternatve models and econometrc procedures have been suggested to overcome the lmtatons of the IIA assumpton n the MNL model. Two of such models dscussed n the lterature are the nested logt and multnomal probt models (Wu and Babcock, 1998; Green, 2000; Henrch and Wenger, 2002). The nested logt model s wdely used n transport and marketng research where the mpled decson choces allow specfcaton 154

10 of a nestng structure or sequencng of decsons. In ths study, however, the nested logt model could not be used for there s no a pror specfcaton of a nestng structure of the decson choces made by households. The MNP model, on the other hand, does not requre ether nestng nor mpose no correlaton of error terms. However, the computatonal dffcultes nvolved wth estmaton lmt ts applcaton. Henrch and Wenger (2002) based on a revew of the works of James J. Heckman and Danel L. McFadden suggested a practcal way of overcomng the IIA problem n emprcal estmaton of the MNL model would be to redefne or restructure the choce varables by collapsng closely related choces nto dstnct groups. In the absence of alternatve specfcatons, ths study used the MNL specfcaton to model smallholder farmers adopton behavor of sol fertlty and conservaton management practces n the hghlands of Ethopa. Provded that the IIA assumpton s met, the maxmum lkelhood estmators are asymptotcally normally dstrbuted wth a mean of zero and a varance of one for large samples (Long, 1997). Nonetheless, the use of cross-secton data to estmate model parameters may stll ntroduce heteroscendastcty problems. Upon ascertanng the valdty of the IIA assumpton, the Huber/Whte/sandwch estmator of varance nstead of the tradtonal varance estmators can be used to account for possble heteroscendastcty of unknown form. Further mprovements of parameter estmates could also be acheved by correctng the varance-covarance (VCE) matrx of the estmators for possble correlaton of errors wthn groups (clusters). Sgnfcance of estmators s tested wth z-statstcs and goodness of ft of the model s assessed by the lkelhood-rato (LR) tests comparng the log-lkelhood from the full model (the model wth all the explanatory varables) wth a restrcted model where only the constant s ncluded. Parameter estmates of the MNL model provde only the drecton of effect of the ndependent varables on the dependent (response) varable but estmates nether represent actual magntude of change nor probabltes. Dfferentatng equaton (7.4) 155

11 wth respect to each of the explanatory varables, however, provdes margnal effects of the explanatory varables gven as: P x j k J 1 jk j=1 = P ( β P β ) (7.6) j j jk The margnal effects or margnal probabltes are functon of the probablty tself whch when multpled by 100 measure the expected change n probablty of a partcular choce beng made wth respect to a unt change n an ndependent varable (Long, 1997; Green, 2000; Ersado et al., 2004) Tobt and Heckman s two-step regresson models for the ntensty of use of norganc fertlzers and stone/sol bunds The ntensty of use of norganc fertlzers and stone/sol bund measured as the sum 28 of damonum phosphate (DAP) and Urea fertlzers appled per unt of cropped area and length of stone/sol bunds, respectvely, are censored contnuous varables. As dscussed above, ths censorng arses due to the fact that not all sample households use norganc fertlzers or stone/sol bunds. Even those households who reported havng used norganc fertlzer and constructed stone/sol bunds may not have done so on all of the plots under ther management. Applcaton of ordnary least square (OLS) to such censored data renders the estmates based. Two approaches suggested and often used n the lterature to overcome the problem are Heckman s two-step procedure (and ts extensons thereof) and the Tobt model (Wnshp and Mare, 1992; Long, 1997; Vella, 1998). Ths study, therefore, adopts these approaches to model the ntensty of norganc fertlzer and stone/sol bunds among smallholder farmers n the Ethopan hghlands. 28 DAP and Urea are consdered as complementary nputs that should be used n certan combnatons dependng on crop type and sol characterstcs. Despte research recommendatons emphaszng use of recommended rates of both DAP and Urea for maxmum yeld, most smallholder farmers prefer DAP to Urea and use more DAP than Urea but at sub-optmal levels. 156

12 The Tobt model, a more general case of probt, besdes the probablty of adopton as n the probt model estmates the value of the contnuous response for the case when y * = ' x β + ε (7.7) Where X s an N * 1 vector of explanatory factors, β s a vector of coeffcents, and ε are 2 ndependently and normally dstrbuted error term wth mean zero and varance, σ. If * y s negatve, the varable that s actually observed, the rate of commercal fertlzer or length of stone/sol bund, y s zero. When * y s postve, * y = y. Followng Long (1997) and Green (2000), the probablty that the rate of norganc fertlzer or stone/sol bund used s zero n the Tobt model could be specfed as: P( y ' β x = 0) = φ( ) σ (7.8) and the densty functon for the postve values of Y s f ( y / y ' 1 y1 β x ) φ( f ( y ) > 0) = = σ σ (7.9) P( y 0) β x > φ( ) σ where φ ( ) s the standard normal probablty densty functon. Equaton (7.8) s a probt model representng the adopton decson whereas equaton (7. 9) represents a truncated regresson for the postve values of the contnuous decson of how much sol fertlty nputs to use ( y > 0). The Tobt model s preferable to OLS for t allows the ncluson of observatons wth zero values. Both the probt and Tobt models requre maxmum lkelhood methods (MLE) to estmate the coeffcents of the adopton equaton. The loglkelhood for the Tobt model conssts of the probabltes for the non-adopton decson and a classcal regresson for the postve values of Y (Long, 1997) gven by: 157

13 ' ' β x 1 y β x ln L = lnφ( ) + ln[ φ( )] (7.10) σ σ σ The estmated coeffcents, β, do not represent the margnal effects of a unt change n the ndependent varable on E(Y) or E(Y * ). Based on the works of McDonald and Mofft, Long (1997), Green (2000) and many others showed the followng decomposton of the margnal effects of the Tobt model: E( Y / X ) E( Y Y > 0) Pr( Y > 0 = Pr( Y > 0) + E( Y / Y > 0) ) X X X j j j (7.11) where Pr(Y>0) s the probablty of an observaton beng uncensored gven X. The above decomposton shows that the total change n the uncondtonal expectaton s dsaggregated nto the change n condtonal ntensty of use weghted by the probablty of adopton and the change n the probablty of adopton weghted by the condtonal ntensty of use. A major concern wth the ML estmators of the Tobt model s ts senstvty to volaton of the basc assumptons of homoscedastcty and normalty of the errors (Long, 1997; Vella, 1998; Green, 2000). Volaton of these assumptons renders the Tobt estmates based and nconsstent (Long, 1997; Vella, 1998; Green, 2000). The ncdence of heteroscendastcty n the Tobt model could be detected usng a lkelhood rato and/or a Lagrange multpler test (Green, 2000). As recommended for the MNL model, n the Tobt model too, the Huber/Whte/sandwch estmator of varance could be used to correct for possble heteroscendastcty of unknown form. Test for the non-normalty of the dsturbance terms n the Tobt model, however, s not straghtforward. Green (2000) suggested alternatve approaches to deal wth the nonnormalty of the error dstrbuton n the Tobt model. One way s to assume alternatve forms of the error dstrbuton (exponental, lognormal and Webull) and compare 158

14 results. Another approach s to use robust estmators less senstve to changes n the dstrbuton of the error terms such as least absolute devatons (LAD) and censored least absolute devatons estmators (CLAD). Emprcal applcaton of sem parametrc models, however, s lmted due to computatonal complexty and hence s not pursued n ths study. A second concern n the proposed Tobt model partcularly for the ntensty of fertlzer use s endogenety. Besdes household, farm, plot and nsttutonal varables hypotheszed to condton norganc fertlzer use, sol fertlty management practces used the prevous season (fallow, legume or farmyard manure) are beleved to be mportant n explanng varatons n norganc fertlzer use among smallholder farmers. These varables are thus ncluded as explanatory varables n the Tobt model. One would argue ncluson of these varables n the rght hand sde of the equaton mght result n based and nconsstent parameter estmates due to endogenety. In prncple, the endogenety problem could be adequately dealt wth a two-stage model or usng nstrumental varable technque (Hassan, 1996). The problem for our data, however, s not expected to be serous as the decson to use norganc fertlzer and other sol fertlty management practces are not made at the same tme. As has been noted earler, the decsons whether or not to use norganc fertlzer and how much norganc fertlzer to use on a plot gven the farmer has decded to cultvate the plot n queston s made at plantng. On the other hand, the decsons to fallow, use legume rotatons or apply farmyard manure are already taken pror to platng ether n the prevous season or durng the off-season. A thrd concern wth the Tobt specfcaton s whether or not t adequately fts the data. The Tobt model s based on the assumpton that there s no sample selecton problem. In the presence of self-selcton, however, results of the Tobt model are based and nconsstent (Wnshp and Mare, 1992; Vella, 1998). Furthermore, the Tobt model assumes that a varable that ncreases the probablty of adopton wll also ncreases the mean amount of nputs used (Ln and Schmdt, 1984; Norrs and Bate, 1987; Katchova and Mranda, 2004). The preposton that the same varables and the same parameter vector affect both the adopton decson and the ntensty of use, however, has been 159

15 questoned (Green, 2000; Gebremedhn and Swnton, 2003; Katchova and Mranda, 2004). Ln and Schmdt (1984) proposed a formal procedure to test the valdty of the Tobt assumpton. Ths test explores whether a censored Tobt model fts the data better compared to a separate probt and a truncated regresson (a Tobt whch only uses nonlmt cases for the dependent varable) by computng the followng lkelhood rato statstc (Ln and Schmdt, 1984; Green, 2000): λ = [ln L (log L + log L ) (7.12) 2 T P TR where λ s dstrbuted as ch-square wth R degrees of freedom (R s the number of ndependent varables ncludng a constant), L T s a lkelhood functon for the Tobt model wth the same coeffcents, L P s a lkelhood functon for the probt model ft separately, and L TR s lkelhood for the truncated regresson model ft separately. If the null hypothess s rejected, Heckmans s (1979) two-step procedure, whch allows for dfferent factors to nfluence the adopton decson and ntensty of use would be approprate. Hckman s two-step procedure descrbed below nvolves estmaton of the probablty model for the adopton decson, calculaton of the sample selecton bas (the nverse Mll s Rato) and ncorporaton of ths selectvty bas varable nto the outcome equaton (ntensty of use) and then apply OLS to estmate the ntensty of use. The frst procedure n Heckmans s to step model s to estmate a probt model for the probablty that Z=1 wth all observatons usng a set of covarates (ω) to estmate a vector of coeffcents (α) gven by. P ( Z = 1) = φ ( ϖ ' α) + e (7.13) The second procedure would be to estmate the expected value of the outcome varable (Y) condtonal on Z=1 and a set of covarates (X ). ' E ( Y z = 1, X ) = X β + E( µ Z ) (7.14) 160

16 The thrd procedure s to evaluate the condtonal expectaton of µ n equaton (7.14) wth respect to the varable, e, represented by ' ' φ( ωα) E( µ e ) ωα = ρσ eσ µ (7.15) ' Φ( ω α) Then, nsertng equaton (7.15) nto equaton (7.14) we get equaton (7.16) as follows: E ' ' φ( ωα) z = 1, X ) = X β + ρσ eσ µ (7.16) Φ( ω α) ( Y ' φ Fnally, we use OLS to regress Y on X and λ gven by: Φ E Y Z = X = ' ( 1, ) X β + θ λ (7.17) 7.3 Choce of varables and hypotheses to be tested As noted above, the adopton behavour of farmers could be traced from ther utlty functons. However, the fact that the arguments of the utlty functon are not well known makes selecton of the determnants of technology adopton a dffcult task (Norrs and Bate, 1987; Shferaw and Holden, 1998). Prevous research on farmers adopton of new technologes ncludng sol conservaton consdered percepton of the problem or constrant (sol degradaton), proftablty of the proposed technology, household and farm characterstcs, attrbutes of the technology and nsttutonal factors such as land tenure, access to markets, nformaton and credt (Ervn and Ervn, 1982; Norrs and Bate, 1987; Pagola, 1996; Shferaw and Holden, 1998; Hassan et al., 1998a; Hassan et al., 1998b; Lapar and Pandey, 1999; Kazanga and Masters, 2002; Bamre et al., 2002; Gebremedhn and Swnton, 2003; Nakhumwa and Hassan, 2003; Bekele and Drake, 2003). Shferaw and Holden (1998) argued that the effect of most of these factors on adopton behavour of farmers s condtoned by market mperfectons prevalent n developng countres ncludng Ethopa. Where market mperfectons are mportant the producton and consumpton decsons of smallholder farmers may not be separable makng ndspensable the ncluson of household characterstcs, asset endowments, nsttutonal factors and other varables mpactng proftablty of the proposed 161

17 technology as explanatory varables n the adopton decson model (Shferaw and Holden, 1998). Therefore, based on nvestment theory, prevous studes and analyss of the agrculture sector of Ethopa, a range of household, farm and plot characterstcs, nsttutonal factors and agro-ecology varatons are hypotheszed to nfluence adopton of sol fertlty management and sol conservaton technologes by smallholder farmers n the hghlands of Ethopa Household characterstcs Household attrbutes often consdered to have dfferental mpacts on the adopton decson nclude age, educaton level of the household head, famly sze and wealth (lvestock ownershp and type of house). Several studes consdered the effect of age of the farmer on adopton decson as a composte of the effects of farmng experence and plannng horzon. Many equated short plannng horzons wth older, more experenced farmers who may be reluctant to adopt sol conservaton practces that may not yeld mmedate benefts whereas younger farmers beng more educated on the average and havng longer plannng horzons may be more lkely to nvest n sol conservaton (Norrs and Bat, 1987; Lapar and Pandey, 1999). On the other hand, greater experence could lead to better knowledge of spatal varablty of plots that could lead to more accurate assessment of adopton. Several studes n Ethopa have shown a postve relatonshp between number of years of experence n agrculture and the adopton of mproved agrcultural technologes, Kebede et al. (1990), whle a study by Shferaw and Holden (1998) ndcated a negatve relatonshp between age and adopton of mproved sol conservaton practces. Hence, consderng the above factors the effect of age of the household head, a proxy for years of experence n farmng, cannot be sgned n the emprcal model a pror. Hgher educaton s beleved to be assocated wth access to nformaton on mproved technologes and the productvty consequences of land degradaton (Ervn and Ervn, 1982; Feder et al., 1985; Norrs and Bat, 1987). Evdence from varous sources ndcates 162

18 a postve relatonshp between the educatonal level of the household head and the adopton behavour of farmers (Norrs and Bat, 1987; Igoden et al., 1990; Ln, 1991), as well as lteracy and adopton behavour (Yrga et al., 1996). Farmers wth hgher levels of educaton, therefore, are more lkely to adopt land augmentng sol fertlty and sol conservaton technologes than those who do not. The nfluence of household sze on the decson to adopt s ambguous. Large famly sze s normally assocated wth a hgher labor endowment that would enable a household to accomplsh varous agrcultural tasks on tmely bases. On the other hand, households wth large famly members may be forced to dvert part of the labor force to off-farm actvtes n an attempt to earn ncome n order to ease the consumpton pressure mposed by a large famly sze. In the hghlands of Ethopa, off-farm opportuntes are rare especally durng the slack perod of the year after the man season harvest when conservaton actvtes are expected to be performed mplyng low opportunty cost of labor durng ths perod. Hence, we expect a household wth large famly sze to be more lkely to adopt land augmentng sol fertlty management practces such as norganc fertlzer and manure especally sol conservaton practces nvolvng labor-ntensve constructons but nversely related to the use of seasonal fallowng. Wealth s beleved to reflect past achevements of households and ther ablty to bear rsk. Prevous studes n Ethopa used the type of house a household owns (corrugated or grass roofed) and the number of lvestock as a proxy for the wealth poston of a household (Yrga et al., 1996; Shferaw and Holden, 1998). Lvestock plays a very mportant role n the mxed crop-lvestock farmng systems of the hghlands. Frst, t serves, as a store of value, whch could be easly traded to meet a household s cash needs n tme of emergences. Second, oxen beng the major source of tracton power play a crucal role n tmely land preparaton and plantng that consequently mproves the margnal productvty of sol fertlty nputs. Thrd, lvestock provdes manure requred for sol fertlty mantenance. Therefore, the number of lvestock owned s hypotheszed to be postvely assocated wth the adopton of sol fertlty and sol conservaton technologes. 163

19 7.3.2 Farm and plot characterstcs Farm characterstcs hypotheszed to nfluence adopton n ths study are farm sze, number of plots (parcels) owned and dstance of plots from the homestead. Smallholder farmers n the hghlands manage several plots of land scattered across a topo-locaton. These plots not only vary n sze but also dffer n sol types, fertlty levels, degree of slope and other plot specfc features. Obvously, adopton of sol fertlty and sol conservaton practces would be a functon of plot characterstcs as these factors nfluence actual and perceved levels of sol degradaton as well as actual and perceved costs and benefts. Norrs and Bate (1987) ndcated that farmers who own and cultvate larger farms are lkely to spend more on conservaton as t s assocated wth greater wealth and ncreased avalablty of captal, whch makes nvestment more feasble. The mpact of farm sze could, however, vary dependng on the type of sol fertlty management and conservaton practces consdered. Households wth relatvely larger farm sze may prefer seasonal fallowng to more ntensve forms of sol fertlty management and conservaton practces whle land scarce households mght have ncentves to adopt labor ntensve management practces. A study by Negatu and Parrkh (1999) revealed a postve mpact of farm sze on adopton of mproved wheat and maze varetes, respectvely, whereas Yrga et al., (1996) reported no assocaton between land per person and the use of crop technologes ncludng commercal fertlzer. Hence, the mpact of farm sze on the adopton decsons could not be predcted a pror. Other thngs beng equal, the larger the plot slope the hgher the eroson hazard. Slope of a plot s therefore expected to have a postve assocaton wth the use of sol conservaton practces. Ervn and Ervn (1982) and Norrs and Bate (1987) noted percepton of an eroson problem s the frst step n the adopton process, whch trggers subsequent adopton. Recognton of eroson has been found to postvely nfluence conservaton behavor n a number of studes (Shferaw and Holden, 1998; Bekele and Drake, 2003). Hence, t s 164

20 expected that households who manage margnal plots (plots wth poor sol fertlty) or face the most sever potental eroson problems are more lkely to adopt sol fertlty and sol conservaton practces. Dstance of a plot from a household s resdence may nfluence a households nvestment decsons n two ways. Frst, dstance of a plot by rasng the labor costs for haulng manure and the opportunty cost of labor (tme lost travelng to and from a plot) may have a dsncentve on nvestments n sol nutrent management and sol conservaton technologes nvolvng substantal labor nputs. Secondly, plots located far from farmers resdences are hgh-rsk nvestments as the chance of loosng these plots s hgher n the event of land redstrbuton. Hence, plot dstance s expected to be negatvely assocated wth the use of anmal manure and legume rotatons, whch requre at least two years to realze the benefts, but postvely wth the use of norganc fertlzer. The physcal sze of a plot may have a range of nfluence on the adopton decson of sol fertlty and sol conservaton practces. For nstance, the area taken up by sol conservaton structures mght potentally reduce crop output and may eventually dscourage adopton of sol conservaton structures. On relatvely large plots, a household may not be concerned wth the potental area loss due to adopton of sol conservaton and subsequent reducton of crop output compared to small szed plots. Physcal structures on small plots of land also cause nconvenences for usng oxen durng ploughng (Shferaw and Holden, 1998). Hence, the potental mpact of plot sze on the adopton of sol fertlty management and sol conservaton would be dfferent. Plot sze s expected to be nversely related to the adopton of land augmentng sol fertlty management practces (commercal fertlzer and manure use) but postvely related to seasonal fallowng and sol conservaton practces Insttutonal factors Insttutonal factors often consdered n emprcal adopton decsons to have dfferental mpacts on technology adopton by smallholder farmers are access to nformaton, nsttutonal credt, off-farm employment and land tenure. Drect government nvolvement 165

21 n the constructon of sol and water conservaton structures on farmers feld has also been cted to have a consderable mpact on the adopton decson (Gebremedhn and Swnton, 2003; Bekele and Drake, 2003). Access to nformaton on sources of new nputs s beleved to contrbute towards optmal use of scarce resources. Varous studes n developng countres ncludng Ethopa reported a strong postve relatonshp between access to nformaton and the adopton behavour of farmers (Kebede et al., 1990; Yrga et al., 1996; Ghadm and Pannell, 1999; Herath and Takeya, 2003). In Ethopa, agrcultural extenson servces provded by the MOA s the major source of extenson nformaton n general and n the study area n partcular. Hence, t s hypotheszed that the greater the number of contacts a household has wth extenson workers, the more lkely the adopton decson. The role of off-farm ncome on the decson to adopt s not clear. It s observed that farmers wth off-farm ncome are less rsk-averse than farmers wthout sources of offfarm ncome. Off-farm actvtes may also reduce the management resources avalable for the adopton process, but access to outsde nformaton may have postve effects. Norrs and Bate (1987) found a negatve assocaton between off-farm employment and adopton of conservaton adopton n the US. Hence, the mpact of off-farm ncome on adopton could not be predcted a pror. There s mxed evdence about the mpact of land ownershp on ncentves to adopt a new technology. Tenure status affects nvestments n sol conservaton by alterng the plannng horzon (Lapar and Pandey, 1999). A number of studes showed that land ownershp ncrease ncentves by lengthenng plannng horzons and the share of benefts accrung to adopters whle lowerng the rates of tme preference. Others argue that the effect of tenure on adopton depends on the type of technology n consderaton. A technology wth a hgh potental to conserve nput use, reduce cost, and provde economc benefts such as conservaton tllage could create ncentves for adopton even among renters, part tme renters and part tme operators (Norrs and Bate, 1987). Nonetheless, t s generally held that renters of farmland are less lkely to nvest n 166

22 conservaton practces because short-term leases reduce ncentves to mantan the productvty of rented land (Norrs and Bate, 1987; Soule et.al, 2000). In Ethopa, despte the fact that land s a publc property under the custody of the government, nformal land markets have thrved where smallholder farmers ether lease land n cash or on share croppng bases (Teklu and Lem, 2004). Nevertheless, gven past experence and the wdely held vew that land redstrbuton s a fact of lfe as long as land remans a publc property, there stll remans much uncertanty concernng tenure securty. It s therefore hypotheszed that adopton of sol fertlty management practces that yeld benefts over a couple of years such as anmal manure and seasonal fallowng as well as conservaton practces are expected to be used more lkely on owned plots (plots allotted to a household drectly by PA offcals) than on rented or share cropped plots. Lqudty constrant (cash shortages) s a typcal feature of smallholder farmers operatng n developng countres. Avalablty of agrcultural credt by easng the lqudty constrant allows smallholder farmers to have access to external purchased nputs such as commercal fertlzer and other new agrcultural technologes, whch ultmately mprove farm productvty. Studes by Zeller et al. (1996), Yrga et al. (1996), Hassan et al. (1998a) underscored the role of credt n enhancng adopton of agrcultural technologes. It s therefore hypotheszed that access to credt wll have a postve mpact on adopton of both sol nutrent and sol conservaton technologes. Sol conservaton practces have been promoted and n some cases constructed by drect publc nterventons on farmers felds. On-farm demonstratons of mproved varetes wth ther assocated cultural practces have also been held to demonstrate the superorty of mproved technologes over tradtonal practces. Hence, t s hypotheszed that households who benefted from drect publc nterventon or partcpaton n demonstratons and extenson package programmes may have developed a postve atttude towards mproved sol management practces. 167

23 7.3.4 Agro-ecology The hghlands of Ethopa are characterzed by dverse clmate, land use and settlement patterns. Wthn the central hghlands a number of sub agro-ecologes or farmng systems have been dentfed based on varatons n alttudes, ranfall, sol type, topographc condtons and type of assocated vegetatve cover. Earler studes ndcated that whle the sub agro-ecologes are smlar n some features they exhbt marked dfferences n terms of sol types, croppng pattern and sol management practces used by farmers that have a strong bearng on the adopton of sol conservaton and sol fertlty management practces. The upper hghlands beng cooler and frost prone are better suted to long cycle (season) crops and crop varetes such as oats and sx rowed barley varetes. The md hghlands on the other hand are relatvely warmer and less susceptble to frost and hence are favorable for growng tef and wheat, the two most mportant cash sources to smallholder farmers n the hghlands. Besdes, wheat and tef are reported to have a better response to norganc fertlzers than barley makng the use of norganc fertlzers more proftable on wheat and tef than barley. Therefore, t s hypotheszed that the probablty and ntensty of norganc fertlzer use would be hgher n the md hghlands where wheat and tef domnate the croppng system than the barley based farmng systems of the upper hghlands. On the other hand, n the upper hghlands where ntensve and contnuous crop cultvaton s less attractve compared to the warmer md hghlands, smallholder farmers tend to keep relatvely larger lvestock than ther counterparts n the md hghlands. Hence, t s hypotheszed that the probablty of usng manure alone or n combnaton wth other sol fertlty management practces s lkely to be hgher n the upper hghlands. 168

24 Table 7.1. Defnton of varables hypotheszed to condton adopton of sol fertlty management and sol conservaton practces by smallholder farmers n the Central hghlands of Ethopan, 2003 Varable Descrpton Values HH characterstcs Age Age of the head of the farm HH Years Educaton Level of formal schoolng attaned by Hghest grade attend the head of the HH Lvestock Number of lvestock owned by a HH Number n TLU House type Whether a HH owned corrugated 1= yes, 0=no ron roofed house or not Famly sze Number of famly members of a HH Number Farm and plot characterstcs Farm sze Total area (crop, fallow, grazng) Area n hectares managed by a HH Plot area The physcal sze of a plot Area n hectares No. of plots Plots owned and managed by a HH Number Plot dstance The dstance of a plot from Mnutes walked homestead Slope Slop of a plot 1=flat, 2=medum, 3=hgh Sol fertlty Farmer percepton of the level of sol fertlty of a plot 1=poor, 2=medum, 3=fertle, 4=manured Degradaton Insttutonal factors Extenson Farmer percepton of the severty of sol loss on a plot (koss) 1=none, 2=lght, 3=sever, 4=very sever If HH has access to extenson 1= yes, 0=no servces Assstance If HH had receved assstance from 1= yes, 0=no government/ngo for constructng conservaton structures Credt If a HH had access to nsttutonal credt for norganc fertlzer Off-farm Income from off-farm actvtes durng the survey year Tenure If plot s owned (allotted to HH by PA) or rented/share cropped Agro-ecology Upper hghlands or md hghlands 1=upper hghlands, 0=md hghlands Dstrct Dend and Debre Berhan 1=Debre Berhane 0=Dend HH=household Amount of money borrowed (Brr 29 ) Estmated average ncome (Brr/year) 1=owned, 0=otherwse 29 Local currency, 1USD=8.6 Ethopan Brr 169

25 CHAPTER VIII: FACTORS INFLUENCING ADOPTION OF SOIL FERTILITY MANAGEMENT AND SOIL CONSERVATION PRACTICES Ths chapter appled the econometrc adopton models specfed n chapter 7 to analyze factors determnng adopton of sol fertlty management and sol conservaton practces by smallholder farmers n the Central hghlands of Ethopa. Secton one presents the econometrc procedures followed to estmate model parameters dscussed n subsequent sectons. Sectons two and three dscuss emprcal results of the econometrc analyses of the factors determnng adopton of sol fertlty management and sol conservaton practces, respectvely. The last secton summarzes the fndngs and mplcatons of the emprcal results. 8.1 Emprcal parameter estmaton procedures Ths secton dscusses econometrc procedures used to estmate model parameters based on the frameworks developed n the prevous chapter. Two multnomal logt (MNL) models for the dscrete dependent varables of sol fertlty and sol conservaton practces and two Tobt models for the ntensty of norganc fertlzer and stone/sol bunds are estmated. All analyss s based on pooled data from the Debere Brehan and Dend dstrcts. In emprcal adopton studes nvolvng cross-secton data multcollnearty often poses a major econometrc challenge. Hence, as a frst step, pror to estmatng any of the adopton models, the ndependent varables were scrutnzed for possble strong correlatons among them. Among the varables hypotheszed to nfluence adopton behavour, age of the head of the farm household was found to be correlated wth educaton level of the household head (ρ=0.29), farm sze (ρ=0.26) and number of lvestock owned (ρ=0.22). Farm sze was also found to be correlated wth plot area (ρ=0.39), number of plots (ρ=0.17) and number of lvestock owned (ρ=0.31). Although these correlaton coeffcents do not suggest ncdence 170

26 of strong multcollnearty, ntal runs of the models revealed that parameter estmates of age and farm sze were consstently nsgnfcant and hence dropped from further consderaton. Farmer percepton of the severty of sol degradaton showed a hgh degree of correlaton wth varous plot attrbutes: sol depth, level of sol fertlty and potental productvty and hence the later were excluded from the fnal regresson equatons. Smlary, dstrct was found to be hghly correlated wth agroecology (ρ=0.64) and hence ether dstrct or agroecology were ncluded as regressors n the estmated models. In all models (both MNL and Tobt specfcatons) robust standard errors of the Huber/Whte/sandwch estmators of varance are used to correct for possble heteroscendastcty of unknown form (Whte, 1980; Vella, 1998). Furthermore, the varance covarance matrx s modfed to account for the non-ndependence of observatons from dfferent plots under the management of the same household through clusterng. All models were estmated by Stata verson 8.0. Model specfc specfcaton tests (the IIA assumpton for the MNL models and senstvty of parameter estmates to alternatve dstrbutonal assumptons of the error term for the Tobt models) are dscussed n the respectve sectons along wth emprcal model results. 8.2 Results of the emprcal analyses of determnants of the use of sol fertlty management practces Adopton rate and pattern of sol fertlty management The study revealed that smallholder farmers n the central hghlands used four types of sol fertlty management (SFM) practces namely seasonal fallowng (fallow rotatons, SF), legume rotatons (LG), anmal manure (AM) and norganc fertlzers (IGF) and ther combnatons at varous ntenstes. As shown n Table 8.1, whle SF and LR are domnant n the upper hghlands, IGF alone or combned wth tradtonal practces appears to be the most mportant practce n the md hghlands. Anmal manure sngly or n assocaton wth other practces s equally mportant n both the upper and md 171