AGRICULTURAL TECHNOLOGY, POVERTY AND INCOME DISTRIBUTION: AN ECONOMIC ANALYSIS IN AWI ZONE OF ETHIOPIA

Abstract

This study investigates the economic benefits of agricultural technology adoption and its impact on rural poverty and income distribution at Awi Administrative Zone, Ethiopia. To achieve its objectives primary data has been collected through structured questionnaire and in-depth interview during the agricultural production season of 2017/18. The results were estimated by using budgetary analysis technique, Blinder-Oaxaca (B-O) decomposition method, Logit model, Tobit model, Propensity Score Matching (PSM) technique and dose–response function. The results of budgetary analysis technique indicated that adoption of fertilizer increased profit of maize producers by 37.7% while it was estimated 58% for those farmers who adopted fertilizer and improved seeds simultaneously. Similarly, adoption of fertilizer in teff production increased profit of farmers by 90.9%. The B-O decomposition found the existence of significant productivity gap between adopters and non-adopters of technologies from 50-73% where 71.7- 77.3% of the differences primarily resulted from adoption of technologies. The logit models revealed that adoption of agricultural technology is determined positively and significantly by education level, family size, access to extension service and access to credit while age of the household affects adoption negatively. As captured by the tobit model, intensity of fertilizer use was influenced by age, education, family size, extension service and accessibility of credit. The PSM technique estimated that annual consumption expenditure per adult equivalent and total household income of fertilizer adopters increased ranging from ETB 1542-1654 and 8369-10710 respectively as compared to non-adopters. Moreover, simultaneous adoption of fertilizer and improved seeds resulted in an increment in consumption expenditure of ETB 1700-1818 and total income of households range from ETB 11293 to 13667. On the other hand, while adoption of fertilizer resulted in a reduction in poverty measured by headcount index of 17.4-18.2%, simultaneous adoption of fertilizer and improved seeds reduced poverty by 18.8-20.0% depending on various matching algorithms. However, it simultaneously worsens distribution of income implying that large farmers were more benefited from adoption than the poor. After adoption of fertilizer, total income inequality measured by Gini coefficient increased ranging from 0.017 - 0.055. On the other hand, simultaneous adoption of fertilizer and improved seeds resulted in an increase in income inequality by about 0.047-0.087 depending on alternative matching algorithms. Generally, this study revealed that adoption of agricultural technologies vi improves agricultural productivity, increase consumption expenditure and reduce rural poverty. Hence, the government, financial institutions, and farmers’ cooperatives should be coordinated to enhance farmers’ adoption of agricultural technologies through expanding extension services, credit accessibility, and ensuring timely availability of technologies at an affordable price. Moreover, further efforts should be exerted to achieve balanced adoption of agricultural technologies since adoption of technology worsen distribution of income.