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Abstract

This study provides empirical evidence on the effects of production risk on smallholder farmers’ adoption of farm technology, using plot-level data collected from two semi-arid districts in Kenya, Machakos and Taita Taveta. Using Mundlak’s approach (1978), the study found that factors such as yield variability and the risk of crop failures indeed affect technology adoption decisions in low-income, rainfed agriculture. However, the direction and magnitude of effects depend on the farm technology under consideration. The results explain why poor farm households in rainfed and risky production environments are reluctant to adopt new farm technologies that could improve production: it is because the technologies involve enormous downside risks. This result underscores the fact that productivity gain is a necessary, but not sufficient, condition to attract farmers to adopt new technologies and agricultural innovations.

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