1. T ECHNOLOGY ADOPTION, HAPPINESS AND CAPABILITIES AMONG SMALL FARM PRODUCERS IN RURAL E THIOPIA P ASQUALE L UCIO S CANDIZZO, S ARA S AVASTANO, F EDERICA A LFANI CEIS - University of Rome “Tor Vergata” 16th ICABR Conference – 128th EAAE Seminar “The Political Economy of the Bioeconomy: Biotechnology and Biofuel” Ravello, Italy, June 24-27, 2012

2. MOTIVATIONS In SSA, most of the population reside in rural areas, and rely on agriculture to secure their livelihood and increase their level of well-being In spite of the fact that many economic and social strategies have been implemented to stimulate industrial growth, Ethiopia is heavily dependent on agriculture Low and volatile incomes mainly depend on results of harvesting seasons but are also associated with poor living conditions related to inadequate sanitary and health, and education facilities New technology adoption in agriculture is of central interest to both academics and policy makers

3. Objectives of the study To explore the relationship between agriculture performance and happiness of rural households To investigate the link between agriculture income, technological progress, subjective assessment of life satisfaction and, above all, the capabilities of rural people to combine self-management and bio-economic skills

4. Measuring Farm Households’ Economic Well-Being Households living in rural areas of developing countries derive most of their incomes from agriculture The level of economic well-being can be gauged using monetary measures (e.g., income from agriculture production and non farm income), or expenditure on goods and services Is economic well-being determined by the level of income from agriculture production?

5. Increases in consumption generally lead to improvements in the level of individual well-being (Fischer, 2009; Courard-Hauri, 2007) but income and consumption only partially account for farmers’ well-being in developing countries Access to land is fundamental for rural households, with land rights crucially linked to the amount of land-related investments undertaken by farmers to obtain significantly higher yields and revenues (Kutcher and Scandizzo, 1981; Besley, 1995; Rozelle et al., 1996; Deininger and Feder, 2001) Recent evidence for developing countries has shown a positive relation between access to value chain or land tenure security, and subjective well-being (Van Landerghem et al., 2008; Dedehouanou and Maertens, 2011) Literature on Households’ Economic Well-Being

6. New Technologies, Market Integration and Subjective Well-Being Elements such as land security, water access, adoption of new technologies (e.g., improved seed varieties and fertilizer), and market integration may be crucial in the context of farm activities and economic well-being of small farmers Adoption of new technologies is a very sensitive issue, especially in SSA Households more integrated in the market, with greater access to resources and happier may be more dynamic and able to realize riskier investments, including the decision to adopt new technologies

7. Technology Adoption in SSA: Constraints and Incentives The adoption of improved seeds and fertilizer has not been as pervasive as during the Green Revolution, with a substantial gap emerging between countries’ production, farmers’ demand and knowledge, and direct usage of these new technologies Possible reasons: a.A mismatch between the planting season in which farmers should access the seeds, and the time when they are able to access to them. b.A lack of improved seeds in the village seeds are delivered in the village on a “first come first serve” basis thereby excluding farmers that are located far from the delivery location c.The availability outside the village farmers are forced to buy seeds on markets different from the local one, and in some cases, paying higher costs to adopt improved varieties

8. Data Source and Descriptive Statistics Data from the 2009 Ethiopian Rural Households Survey (ERHS) including, among others, information on perception of poverty, well-being and trust; restricted sample of 1,253 households, out of which 47.18% declared to be satisfied with life We used self-rated satisfaction with life, divided in 5 categories (from 1=Very unsatisfied to 5=Very satisfied), as measure of overall household welfare. The choice of this variable is consistent with results from the PCA on a set of other survey variables related with perception of life Farmers cultivate on average 1.47 ha of land, 53.5% of them uses fertilizer, 22.8% adopts improved seeds and 71% owns one or more plough (proxy for labor augmenting farm capital)

9. Descriptive Statistics UnitMeanSt. Dev.MinMax Socio-Economic Characteristics HH sizeNb.5.822.56116 Age of the headYears52.6114.8515100 Children in the HH%27.5720.66083.33 Female adults in the HH%26.3217.380100 Education of the headYears 1.832.81013 HH head with no education%47.7349.960100 Satisfaction with life Satisfaction with life in 20093.031.1515 Satisfaction with life in 20042.971.0915 Farm Characteristics Net agriculture income in 2009 USD 610667-2706,491 HHs using fertilizer % 53.4749.900100 HHs adopting improved seeds in 2009 % 22.8341.990100 HHs practicing soil conservation from 2004 to 2009 % 17.0037.580100 HHs own one or more plough % 70.9545.420100 HHs having experienced drought from 2004 to 2009 % 40.7849.160100 HHs having experienced input prices increase from 2004 to 2009%36.1548.060100 Figures refer a sample of 1.253 farm household

10. Estimation Method Where, VP i Household income from agriculture (crop and livestock) production VP i v Income from agriculture production of “neighbors” X i Vector of variables of household socio-economic characteristics T i Variables on new technology adoption S i Negative shocks which may have been experienced by the household, such as droughts, pests or diseases on crop production, increases on input prices, during the past five years Following the literature (Ravallion and Lokshin, 2005), in our analysis, we use satisfaction with life (SWL) as categorical measure of utility for farmers

11. Estimation Results Fourteen woreda dummies estimated but not reported. *Significant at 10%; ** Significant at 5%; *** Significant at 1%. Ordered Probit on Satisfaction with Life in 2009Coeff. Satisfaction with life in 20040.0585* Net total agriculture income in 2004 0.0001** Leave-out mean for village in 2004 0.0005* Leave-out mean for village squared in 2004 -0.0018*** HH economic situation compared to 1 year before the interview 0.193*** Log of HH size0.285*** Share of children in the HH-0.616*** Share of female adults in the HH-0.497** Dummy for primary education of HH head-0.290* Household head working as farmer or family farm worker0.270* Household head working as off-farm worker0.0496 Local availability of seeds0.0411 External availability of seeds – Proxy for extension in other villages-0.316* HH using fertilizer in 20090.164* HH practicing soil conservation measures since 20040.167* HH having experienced drought between 2004 and 2009-0.232** HH having experienced input prices increase between 2004 and 2009-0.183** HH owns one or more plough0.189** HH owns one or more cell phone0.267** Observations1,253

12. Key Results Satisfaction with life: probability of being in a higher class Estimated Elasticities Net agriculture income in 2004 0.020 Leave-out mean for village in 20040.067 Leave-out mean for village squared in 2004 -0.019 HH size 0.049 Children in the HH -0.022 Women in the HH -0.019 Threshold mean village agriculture income at which satisfaction with life response becomes negative 1,267 USD/year

13. Conclusions HH agricultural income has a positive and significant effect on life satisfaction, but a very small impact Average village agricultural income has a positive and significant effect, larger than HH income Its marginal effect on HH happiness follows a quadratic (inverted U-shaped) relationship and turns negative at the threshold value of 1,267 USD Family size has a positive effect on life satisfaction, much larger than income, but both the number of children and the number of women appear to have a marginal negative effect

14. Conclusions (cont’d) Adoption of fertilizer seems to be associated with higher level of well-being, a finding that suggests a positive interaction between happiness and dynamism of the household The availability of extension services (improved seed as proxy) in other villages has a negative effect on satisfaction, confirming the importance of community over personal variables