Uncertainty aversion and farmers' innovative seed adoption: Evidence from a field experiment in rural China

Based on the microdata of 705 wheat farmers in the Loess Plateau, this study empirically analyzes the impact of uncertainty on farmers' adoption of innovative seeds using a field experiment. The results indicate that farmers are generally ambiguity-averse and risk-averse. In addition, farmers with higher ambiguity aversion and risk aversion are less likely to adopt innovative wheat seeds, where their risk aversion plays a dominant role. Enhancing information access will alleviate the negative influence of ambiguity aversion on farmers' adoption of innovative seeds, and interlinked insurance and credit contracts will be beneficial to ease the adverse effect of risk aversion on the adoption of innovative wheat seeds. Meanwhile, heterogeneity analysis reveals that the inhibitory effects of ambiguity aversion and risk aversion on innovative seed adoption are more significant among farmers with lower education and household income. The government can establish both ex-ante and ex-post relevant guarantee mechanisms to help farmers preferably cope with various uncertainties in the production process, remitting farmers' ambiguity aversion and risk aversion to enhance new agricultural technology adoption rates.

Automated summary

Based on a field experiment using the microdata of 705 wheat farmers in the Loess Plateau, this study empirically investigates the impact of uncertainty on farmers' adoption of innovative seeds. The findings show that farmers tend to avoid ambiguity and risk. Higher levels of ambiguity aversion and risk aversion are associated with lower likelihood of adopting innovative wheat seeds, with risk aversion playing a dominant role. Improving information access helps mitigate the negative influence of ambiguity aversion, while interlinked insurance and credit contracts can alleviate the adverse effect of risk aversion. Heterogeneity analysis reveals that the inhibitory effects of ambiguity aversion and risk aversion on innovative seed adoption are more pronounced among farmers with lower education and household income. The government can establish guarantee mechanisms to help farmers cope with uncertainties and reduce their aversion, thus promoting the adoption of new agricultural technology.