1

2 Measuring farm-level and aggregate economic impacts of improved maize production

3 technologies in Ethiopia: Evidence from panel data
4
5 Menale Kassie, Yohannis Tessema, Paswel Marenya, Di Zeng, Moti Jaleta and Olaf
6 Erenstein
7
8 Abstract
9 The essence of agricultural development is to improve both individual and household welfare
10 and in the aggregate, achieve desirable economic and social impacts. Despite vast literature
11 on the impact of technologies and improved farming practices adoption, few studies have
12 attempted to measure the overall effects of improved technologies by taking into account their
13 indirect effects. We sought to measure the direct and indirect effects of technologies deployed
14 for maize production in Ethiopia, namely improved seeds, chemical fertilizer and crop
15 diversification. We combined panel econometric method in a multiple treatment counterfactual
16 framework and economic surplus approach on two waves of large comprehensive household
17 surveys collected in 2010/11 and 2012/13. Our results showed that adoption of technologies
18 have reduced the per kilogram cost of maize production by about 16%, on average. As a result,
19 producer and consumer surpluses have increased by about US$ 91.99 and 45.99 million,
20 respectively. Results further revealed that technologies have reduced the number of poor
21 people by about 178 thousand per annum in Ethiopia. The findings confirm the positive impacts
22 of technologies associated with maize production on poverty alleviation and show that
23 producing maize with all technology sets provides the highest payoffs with respect to yield
24 while diversifying maize with legumes is the cheapest option for maize production. These
25 support promoting combination of technologies as strategy to alleviate poverty in the face of
26 climate change.
27
28 Key words: maize, welfare impact, panel data, economic surplus, Multiple treatment, Ethiopia,
29
30
31

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32 1. Introduction
33 Supported by the availability of large data sets and methodological developments, empirical studies
34 on the impact of agricultural technologies have proliferated (e.g., Mendola 2007; Kassie et al., 2011;
35 Zeng et al. 2015). The studies have also been stimulated by increased pressure from international
36 donors and governments for accountability, and in recognition of the importance of priority setting in
37 research and extension. Improved technologies adopted for the production of staple crops (such as
38 maize) could not only have direct effects on producers but also indirect effects on both producers and
39 consumers (De Janvry and Sadoulet, 2002). This is true in a semi-subsistence agricultural production
40 system where farm households are both producer and consumer of their produce. The direct effects
41 of technology adoption include changes in productivity and cost of production, while the indirect
42 effects emanate from technology-induced price change in markets. In Ethiopia, farmers consume and
43 sell about 58% and 42% of own maize harvest, respectively. Despite the vast literature on the impact
44 of technologies adoption, few studies have attempted to measure the overall effects of
45 technologies/practices by taking into account their indirect effects (Byerlee 2000). To partly fill the
46 existing knowledge gap, using panel data and combination of econometric and economic surplus
47 approaches, this study measured the direct and indirect effects of individual and a combination of
48 technologies used for maize production, namely improved seed, chemical fertilizer and cropping
49 system diversification (CSD) (maize–legume intercropping or rotation). Such study is important to
50 identify effective combination of technologies that are feasible for farm-level adoption and explore
51 how they should be packaged or combined to facilitate adoption.
52
53 Maize, a common staple crop throughout sub-Saharan Africa (SSA), is a widely grown cereal crop
54 across a wide-range of agro-ecologies. In Ethiopia, maize ranks first in volume of production and
55 second in total allocation to production area. Also, more farm households grow it more than any other
56 crop in the country (Abate et al. 2015). This implies that increased maize productivity can play a
57 pivotal role in achieving food security and in reducing poverty. It has long been known that technical
58 change is the underlying factor for agricultural and overall economic growth (Solow 1956). It is also
59 well documented that structural transformation and economic growth in the developed world was
60 fuelled by technical innovation in agriculture. Both area expansion and changes in productivity
61 account for the observed increase in maize production in Ethiopia (Abate et al. 2015). However, little
62 opportunity remains to step up maize production through area expansion, since most of the land has
63 been brought under cultivation. Thus, the future production of maize lies in development and use of
64 improved technologies and farming practices.

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65
66 Maize has received the highest research attention than any other crop in Ethiopia. During the last
67 several decades, national agricultural research systems (in collaboration with the International Maize
68 and Wheat Improvement Center) have developed and released more than 40 improved maize
69 varieties. These varieties, along with chemical fertilisers, have been promoted as a package to
70 smallholder farmers. Recently, it has become increasingly clear that the potential of these innovations
71 cannot be realised without combining them with improved framing practices, particularly in the face
72 of climate change. Agronomists have been involved in developing improved crop management
73 practices to increase sustainable maize productivity. Cereal–legume intercropping and rotation
74 system is a case in point. The integration of maize and legumes in maize based systems is important
75 in the face of climate change, as it leads to higher and more stable grain yield, higher cereal protein
76 concentration and reduces market risks (Hobbs 2007; Teklewold et al. 2013; Bedoussac, 2015; Kassie
77 et al.; 2015).
78
79 Research on cropping system diversification (CSD) is based on field experiments, which are drawn
80 from limited agro-ecologies (Ito et al. 2007; Rockstrom et al. 2009). More importantly, the
81 experimental results are unsubjected to the myriad heterogeneous constraints of diverse smallholder
82 farming communities. Some recent studies bring socio-demographic data to bear on the analysis of
83 the direct effects of such innovations as CSD on farm households (see Teklewold et al. 2013; Kassie
84 et al. 2015). These studies, however, still fall short because they fail to account for the indirect effects
85 of the technology on producers and consumers. Instead, the application of economic surplus, which
86 is used to capture the indirect effects of technologies, is limited to improved varieties, particularly
87 transgenic varieties (Lence and Hayes 2005; Qaim and Traxler 2005; Krishna and Qaim 2008; Zeng
88 et al. 2015), and its use is non-existent in relation to CSD and combinations of technologies.
89
90 The adoption of a new technology often reduces the cost of production per unit of output, which in
91 turn would bring about a rightward shift in market supply that in turn, if accentuated by inelastic
92 demand, could cause a significant drop in prices. This can have large benefits for consumers; yet, the
93 overall effect of these changes on producers can be ambiguous, depending on whether cost reduction
94 per unit of output outweighs the price reduction effect of the technology (Alston et al. 2009). The
95 benefits of a technology might accrue to consumers and by-pass producers, who are often assumed
96 to be the primary beneficiaries.
97

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 98 Our study was based on two waves of large farm household survey data collected in 2010/11 and
99 2012/13 in the maize growing regions of Ethiopia. We used panel multinomial endogenous switching
100 regression in a multiple treatment counterfactual framework, to measure the direct effects of the
101 technologies with respect to yield and cost of production, while controlling for selection bias and
102 unobserved heterogeneity. The panel data and endogenous switching regression allow us to account
103 for potential time invariant and time variant unobservable factors respectively. Using panel
104 econometric model estimates, we built an economic surplus model to determine the extent of
105 technology-induced supply shift, and thus the indirect effects of improved technologies. It is often
106 argued that economic surplus analysis is policy irrelevant, as policy makers may fail to comprehend
107 the implications of changes in economic surplus analysis (Alston et al. 1995); thus, we also estimated
108 the number of people lifted out of poverty as a result of technology-induced change in economic
109 surplus.
110
111 To the best of our knowledge, this is the first study that combines econometric and economic surplus
112 models to estimate both the direct and indirect effects of composite technologies (including crop
113 diversification), employed for maize production. Here, we show a framework for building an
114 economic surplus model that involves using more than two technological options for maize
115 production. We also show a procedure to account for legume yield in the economic surplus model for
116 the maize–legume intercrop, a form of crop diversification.
117
118
119 2. Conceptual and empirical framework
120 2.1 Direct effects of improved technology adoption
121 Assessing the benefits of technology adoption first requires estimating the direct effect of technology
122 adoption, both in terms of productivity and per unit costs changes. The direct effect seeks to answer
123 what would be the productivity and per hectare cost of maize production if the plot was treated with
124 a different technology. Answering this question would be simple if our data were drawn from
125 randomly carried out experiments. Simple comparisons of the mean yield and costs of production for
126 different technologies would suffice. Our data are however drawn from household surveys where
127 covariates are not randomly distributed across technologies. In a world where unobserved
128 heterogeneity does not exist, regressing the outcome variable (yield or cost) on dummy variables that
129 capture technology choice would be sufficient if observed covariates are accounted for. Alternatively,
130 non-parametric techniques such as matching could be applied. However, these conditions rarely exist

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131 in survey data, and so both approaches might be plagued with endogeneity biases, as there could be
132 unobserved characteristics that underlie both technology set choice and outcome variables.
133
134 We harnessed the panel nature of our data to attenuate the adverse effects of unobserved heterogeneity
135 on model estimation. In panel data, fixed and random effect models are used, depending on the
136 assumption of the correlation between error terms and explanatory variables. To avoid the need to
137 make stringent assumptions, correlated random effect models that combine the fixed and random
138 effect models have been proposed (Mundlak 1978; Chamberlain 1984). This approach also eliminates
139 the incidental parameter problem associated with fixed effect choice models. Furthermore, it allows
140 estimation of time constant explanatory variables. The correlated random effect model is, therefore,
141 adopted in this paper.
142
143 The use of panel data models might be inadequate in estimating the effects of technology set choice
144 on yield and cost, as they produce consistent estimates of the outcome equations only if the selection
145 process is time invariant. However, the selection process might be generated by time-varying
146 unobserved characteristics (Dustmann and Rochina-Barrachina, 2007). To circumvent sample
147 selection problems due to time varying unobserved heterogeneity, we employed a multinomial
148 switching endogenous regression model that enables the capturing of time varying unobserved
149 characteristics. This model also provides additional benefit by allowing interaction between
150 technology set choice and explanatory variables. This means the effect of technology choice is not
151 limited to the intercept of the outcome equation (previous studies assume this, e.g., Zeng et al. (2015),
152 but also has slope effect (Kassie et al. 2011; Teklewold e al. 2013). The labour economics literature
153 has seen the use of switching endogenous regression models for some time (Brewer et al., 1999; Dahl,
154 2002; Dustmann and Rochina-Barrachina, 2007; among others). There are also a few applications in
155 agricultural technology adoption impact analysis (Di Falco, 2011; Kassie et al., 2015; Teklewold et
156 al., 2013).
157
158 Multinomial switching endogenous regression framework involves estimating a selection equation
159 followed by an outcome equation for each technology choice. We considered three improved
160 technologies, providing eight possible technology sets from which a farm household can choose
161 (Table 1). A farm household is assumed to choose among eight mutually exclusive technology sets 𝑗
162 (𝑗=1, 2,...,7) for the plot 𝑖 in time 𝑡, where ‘𝑗 = 0’ denotes non-adoption of any of the improved
163 technologies(D0F0I0) while the remaining technology sets (𝑗 = 1, … ,7) contain at least an improved

5
164 technology. A farm household 𝑘 chooses technology 𝑠 if its utility 𝑈 outweighs the utility that could
165 be obtained from all other alternatives, i.e.,
166 U𝑠𝑡 > 𝑚𝑎𝑥(𝑈𝑗𝑡 )
167 𝑗 = 1, … , 𝐽
168 𝑗≠𝑠
169 The utility derived from each technology set depends on household and plot characteristics, and it is
170 expressed as follows:
171
173 𝑈ℎ𝑖𝑡,𝑗 = 𝑋ℎ𝑖𝑡 𝛽𝑗 + 𝛼ℎ + 𝜀ℎ𝑖𝑡,𝑗 𝑗 = 0,1, … ,7 (1)
172
174 where 𝑋ℎ𝑖𝑡 is a matrix of household, plot, and village characteristics, 𝛽𝑗 are parameters to be
175 estimated, 𝛼ℎ is unobserved time constant heterogeneity, and 𝜀ℎ𝑖𝑡,𝑗 is the disturbance term.
176
177 An econometrician observes technology set choice but not the utility derived from the technology set.
178 We employed multinomial logit model to map the latent utility into technology set choice, assuming
179 the error terms are identically and independently Gumbel distributed. Thus, the probability a farm
180 household ℎ selects technology set 𝑗 on his plot 𝑖 at time 𝑡 is estimated:
exp(𝑋ℎ𝑖𝑡 𝛽𝑠 + 𝛼ℎ )
181 𝑃𝑟𝑜𝑏 (𝑗 = 𝑠) = 𝐽 (2)
∑𝑗=1 exp(𝑋ℎ𝑖𝑡 𝛽𝑗 + 𝛼ℎ )
182
183 Following Mundlak (1978), we parameterised unobserved heterogeneity (𝛼ℎ ) using the mean values
184 of time-varying explanatory variables (𝑋̅ℎ𝑖 ):
185 ̅̅̅̅
𝛼ℎ = 𝛾𝑋 ℎ𝑖 + 𝜔ℎ𝑖 (3).
186
187 As noted earlier, applying panel models on production and cost functions without considering sample
188 selection might fail to yield consistent coefficients. To correct selection bias in the outcome equations,
189 we followed a variant of the Dubin and McFadden (1984) model developed by Bourguignon et al.
190 (2007)1. The three technologies (improved maize varieties, chemical fertiliser, and cropping systems
191 diversification) provide eight possible composite technologies that a farm household can choose
192 (Table 1).
193

1
This variant of Dubin and McFadden (1984) is less sensitive to IIA assumption, which undermines the application of
multinomial logit model.

6
 𝑞
𝛽0𝑞 + 𝜇0ℎ
𝑞
+ 𝜆̂0ℎ𝑖𝑡 𝜎0𝑞 + 𝜖0ℎ𝑖𝑡
𝑞
𝑅𝑒𝑔𝑖𝑚𝑒 0: 𝑄0ℎ𝑖𝑡 = 𝑍0ℎ𝑖𝑡 𝑖𝑓 𝑗 = 0
194 { ⋮ (4
𝑞
𝛽𝐽𝑞 + 𝜇𝐽ℎ
𝑞
+ 𝜆̂𝐽ℎ𝑖𝑡 𝜎𝐽𝑞 + 𝜖𝐽ℎ𝑖𝑡
𝑞
𝑅𝑒𝑔𝑖𝑚𝑒 𝐽: 𝑄𝐽ℎ𝑖𝑡 = 𝑍𝐽ℎ𝑖𝑡 𝑖𝑓 𝑗 = 𝐽, 1, … ,7
195
𝑐
𝑅𝑒𝑔𝑖𝑚𝑒 0: 𝐶0ℎ𝑖𝑡 = 𝑍0ℎ𝑖𝑡 𝑐
𝛽0𝑐 + 𝜇0ℎ + 𝜆̂0ℎ𝑖𝑡 𝜎0𝑐 + 𝜖0ℎ𝑖𝑡
𝑐
𝑖𝑓 𝑗 = 0
196 { ⋮ (5
𝑐
𝑅𝑒𝑔𝑖𝑚𝑒 𝐽: 𝐶𝐽ℎ𝑖𝑡 = 𝑍𝐽ℎ𝑖𝑡 𝑐
𝛽𝐽𝑐 + 𝜇𝐽ℎ + 𝜆̂𝐽ℎ𝑖𝑡 𝜎𝐽𝑐 + 𝜖𝐽ℎ𝑖𝑡
𝑐
𝑖𝑓 𝑗 = 𝐽, 1, … ,7
197
198 Where 𝑗 = 0 denotes non-adoption of either technology and 𝑗 = 1, … 7 represents adoption of either
199 technology or their combination; 𝑄is maize yield per hectare(ha) of the ℎ𝑡ℎ household on a plot 𝑖 at
200 time 𝑡 in regime 𝑗, 𝑍represents a set of explanatory variables that influence maize yield and
201 production costs at time 𝑡, 𝛽are parameters to be estimated, 𝜇 are time invariant unobservable
202 household characteristics, 𝜆̂ are the selection correction terms2 derived from equation 2, 𝜎 is the
203 covariance between the error terms of selection equation and outcome functions. 𝐶 is per hectare cost
204 of maize production of the ℎ𝑡ℎ household on a plot 𝑖 at time 𝑡 in regime 𝑗 and it consists of labour3,
205 fertilizer, seed and chemical costs. As in the choice model, we parameterised the time invariant
206 unobserved variable (𝜇) by the mean values of time-varying explanatory variables (𝑍̅ℎ𝑖 ).
207
208 To assess the effect of technology set choice on maize productivity and cost of production, one needs
209 to know the counterfactual outcomes, i.e. what would have been the maize productivity and cost of
210 production for plots treated with a different technology set had they not been treated or the vice versa.
211 Here, following (Carter and Milon,2005; Kassie et al., 2015) we present the counterfactuals for
212 production function for brevity although similar approach can also be extended to the cost functions.
213 The actual expected value of maize yield for a farm household ℎ that adopted technology 𝑗 on a plot
214 𝑖 in time 𝑡 is given as follow:
𝑞
215 𝐸(𝑄𝐽ℎ𝑖𝑡 ⁄𝑗 = 𝐽) = 𝑍𝐽ℎ𝑖𝑡 𝛽𝐽𝑞 + 𝑍𝐽ℎ𝑖
̅ 𝑞 𝜑𝐽𝑞 + 𝜆̂𝐽ℎ𝑖𝑡 𝜎𝐽𝑞 𝑗 = 1, … ,7 (6)
216
217 On the other hand, the counterfactual expected value of maize yield on a plot 𝑖 in time 𝑡 with a
218 technology set 𝑗 that contains one or more improved technologies had adopted the conventional
219 technology set is given as follow:

2
See Bourguignon et al. (2007) for the derivation of selection bias correction term from the choice model.
3
Since most of the surveyed farm households rely on family labour, we imputed the cost of labour from production
function following Jacoby (1993).

7
 𝑞
220 𝐸(𝑄0ℎ𝑖𝑡 ⁄𝑗 = 𝐽) = 𝑍𝐽ℎ𝑖𝑡 𝛽𝑜𝑞 + 𝑍𝐽ℎ𝑖
̅ 𝑞 𝜑0𝑞 + 𝜆̂𝐽ℎ𝑖𝑡 𝜎0𝑞 𝑗 = 1,2, … ,7 (7)
221
222 where 𝑄0ℎ𝑖𝑡 is the yield that would have been achieved with conventional technology set(D0F0I0).
223 The parameters: 𝛽, 𝜑 and 𝜎 are coefficients for conventional technology set production function and
224 other variables are as defined above. Equation 7 defined as the maize yield of adopters which would
𝑞 ̅ 𝑞 𝑎𝑛𝑑𝜆̂𝐽ℎ𝑖𝑡 ) had been the
225 have obtained if the returns (coefficients) on their characteristics (𝑍𝐽ℎ𝑖𝑡 , 𝑍𝐽ℎ𝑖
226 same as the returns (coefficients) on the characteristics of the non-adopters, and vice versa.
227
228 Taking the difference between equations 6 and 7 gives the average effect of technology on adopters,
229 often mentioned in the literature as the average treatment effect on the treated (ATT).
𝐴𝑇𝑇𝑦 = 𝐸(𝑄𝐽ℎ𝑖𝑡 ⁄𝑗 = 𝐽) − 𝐸(𝑄0ℎ𝑖𝑡 ⁄𝑗 = 𝐽)
230 (8)
= (𝛽 𝑞 − 𝛽 𝑞 )𝑍 𝑞 + (𝜑 𝑞 − 𝜑 𝑞 )𝑍̅ 𝑞 + (𝜎 𝑞 − 𝜎 𝑞 )𝜆̂𝐽ℎ𝑖𝑡
𝐽 0 𝐽ℎ𝑖𝑡 𝐽 0 𝐽ℎ𝑖 𝐽 0

231
232 The first two terms indicate yield change due to the difference in returns to observed characteristics
233 and time-invariant unobserved characteristics, respectively, and the last term is attributed to yield
234 change because of time-varying unobserved heterogeneity difference.
235
236 The ATT for yield and cost functions generated from equation 8 serve as an input in the economic
237 surplus approach to compute the supply shift parameter (k-shit parameter) discussed below.
238
239 Estimating equations 1 and 4 and 5 using same explanatory variables may not suffer from collinearity
240 problem due to non-linearity of inverse Mills ratios. Even if collinearity is an issue, the significance
241 level of our variable of interest will not be affected because of lack of exclusion restriction. This is
242 because we did not use pooled regression (a dummy treatment variable included in outcome
243 equations) instead as indicated above a separate regression for adopters and non-adopters is estimated
244 and we then compared the predicted expected actual and counterfactual outcomes to explore impacts
245 of adoption. Despite this, we exclude some variables affecting the selection equation but not the
246 outcome equations. In the survey, farm households were asked whether they received information
247 regarding improved technologies, as information access is expected to affect maize productivity
248 through its effect on technology set choice decision. Thus, dummy variables that represent whether
249 farm households had information access about the technologies are included in the selection equation,

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250 but they are excluded from the production and cost functions. We have also excluded access to credit
251 and distance to agricultural extension office from the production and cost functions4.
252
253 2.2 Indirect effects of improved technology
254 Measuring the full effects of technology set choice, however, could be more profound. Farm
255 households supply part of their produce to the market and the direct effects of technology choice leads
256 to an indirect effect on producers’ and consumers’ welfare by way of its effect on market equilibrium
257 quantity and price. To examine the indirect effects of technology adoption, we built an economic
258 surplus model that traces shifts in the supply and demand curves to estimate changes in consumer and
259 producers’ surplus5. We assumed that the market mechanism is in place; price is set by demand and
260 supply forces. Our economic surplus model is based on linear demand and supply curves following
261 mainstream literature (Alston et al., 1995; Lence and Hayes, 2005; Qaim and Traxler, 2005; Krishna
262 and Qaim, 2008; Zeng et al., 2015). We further assumed that demand curve is stationary, but the
263 supply curve experiences a technology-induced parallel shift.
264
265 We needed to understand both the scenarios, with and without new technology. As this is an ex post
266 impact analysis, the observed equilibrium quantity and price are the ones with the new technology.
267 We needed to estimate the equilibrium quantity and price that would prevail if the new technology
268 were not adopted (counterfactual maize quantity and price). To find out the ‘without new technology’
269 market equilibrium scenario, we estimated a 𝐾-shift parameter. The K-shift parameter is the level of
270 vertical shift in the supply curve that is caused by changes in crop productivity and cost of production
271 (Alston et al., 1995).
272
273 Depending on the nature of technology adopted, producers could enjoy either increased productivity
274 (for a given level of inputs) or reduced cost of production (less cost for a given level of production)
275 per unit of cropped area. Improved maize variety and chemical fertilisers are typical examples of
276 productivity-enhancing technologies. On the other hand, integrating legumes to maize production
277 could increase the nitrogen content in the soil and negate the demand for chemical fertiliser, which in

4
To check the validity of the exclusion restrictions, we conducted a falsification test. We include the exclusion restriction
variables in the estimation of both the selection and outcome equations for both production and cost functions. The results
show that the excluded variables have a statistically significant impact on technology set choice whereas they do not exert
a statistically significant impact on the outcome equations (production and cost functions), supporting the validity of the
exclusion restriction.
5
Consumer surplus is the difference between what a consumer is willing to pay and what the individual actually pays,
and producer surplus is the difference between what the producer is willing to sell and what he/she actually sells.

9
278 turn would reduce the cost of production per unit cropped area. In the case of productivity-enhancing
279 technologies, although the cost of production per unit of cropped area remains constant, cost per unit
280 of output falls owing to increase in yield. If a technology affects both yield and cost of production per
281 unit area, the resultant change in cost per unit of output would then be the sum of cost change per unit
282 of output due to increased productivity and cost change per unit of cropped area. It is important to
283 note that the supply curve is a locus of the marginal cost of production given the underlying
284 production technology. The overall cost reduction per unit of output, which is termed a K-shift
285 parameter, is mathematically estimated as follows:
286
𝐴𝑇𝑇𝑦 𝐴𝑇𝑇 𝑐
287 𝐾=( − 1+𝐴𝑇𝑇 )×𝐴 (9)
𝜖 𝑦

288
289 where 𝐴𝑇𝑇𝑦 and 𝐴𝑇𝑇𝑐 are the yield and cost ATT estimated from equation 8. As shown in equation
290 9, the elasticity of supply 𝜀 and level of adoption (𝐴) of the technology concerned, also influence K-
291 shift parameter.
292
293 The Ethiopian economy vis-à-vis maize trade is categorised as a closed economy, as the volume of
294 maize exports and imports fall below 1%. In a closed economy, technology-induced supply shift
295 would lead to a drop in equilibrium price, since the international market would be unavailable to
296 absorb the increase in supply. The counterfactual equilibrium price that would prevail if the
297 technology were not adopted is computed as follows:
298
299 𝑃0 = 𝑃1 (𝜀 + 𝜂)/(𝜀 + 𝜂 − 𝐾𝜀) (10)
300
301 where 𝑃0 is the counterfactual output price level, 𝑃1 is the observed output price, and 𝜂 is absolute
302 demand elasticity.
303
304 The counterfactual equilibrium quantity can be estimated as the sum of observed maize quantity
305 production and change in quantity of production as a result of the new technology.
306
307 Assuming the economy is closed, changes in producer surplus (∆𝑃𝑆) and consumer surplus (∆𝐶𝑆)
308 attributed to the new technology would be:
309

10
310 ∆𝑃𝑆 = 𝑃0 𝑄 0 (𝐾 − 𝑍)(1 + 0.5𝑍𝜂) (11)
311 ∆𝐶𝑆 = 𝑃0 𝑄 0 𝑍(1 + 0.5𝑍𝜂) (12)
312
𝑃 0 −𝑃 1
313 where 𝑄 0 is the counterfactual equilibrium quantity and 𝑍 is the relative change in price 𝑍 = ( ).
𝑃0

314 The total change in economic surplus (∆𝐸𝑆) is the sum of changes in producer surplus and consumer
315 surplus.
316
317 Consumer surplus is part of the indirect effects of improved technology that accrue to consumers due
318 to a price fall. Technology-induced price drop would, however, depress producers’ benefits. A
319 producer surplus accounts for changes, both in the cost of production and market price. Following
320 Zeng et al. (2015), we decompose producer surplus into price and adoption effect as follows:
321
322 ∆𝑃𝑆 = ∆𝑃𝑆𝑝𝑟𝑖𝑐𝑒 + ∆𝑃𝑆𝑎𝑑𝑜𝑝𝑡𝑖𝑜𝑛 (13)
323
324 The adoption effect is the direct effect of improved technology related to cost reduction per unit
325 output from adopting the improved technology, while the price effect is the indirect effect of
326 improved technology due to a price fall. The portion of change in producer surplus attributable to the
327 price change is estimated as:
328
𝐾𝜀𝑃1 𝑄 0 𝐾𝜀𝑃1
329 ∆𝑃𝑆𝑝𝑟𝑖𝑐𝑒 = ( 0 − 1) (14)
𝜀 + 𝜂 − 𝐾𝜀 2𝑃 (𝜀 + 𝜂 − 𝐾𝜀)
330
331 The adoption effect-(∆𝑃𝑆𝑎𝑑𝑜𝑝𝑡𝑖𝑜𝑛 ) would then be estimated by deducting the change in producer
332 surplus associated with price effect (∆𝑃𝑆𝑎𝑑𝑜𝑝𝑡𝑖𝑜𝑛 ) from the total producer surplus.
333
334 2.3 Poverty impact analysis
335 In sub-Saharan Africa, growth in agriculture combats poverty on different fronts. First, the majority
336 of the poor depend on agriculture, thus any attempt to improve the sector benefits them. Second,
337 enhancing agricultural productivity, particularly staple crops such as maize, reduces the staple food
338 price, and in so doing helps to lift the urban and rural poor out of poverty. Third, agriculture has
339 strong backward and forward linkages with other sectors than any other economic sector, and thus
340 creates employment opportunities for the poor along the value chain, thereby contributing to poverty
341 reduction (Christiansen and Demery 2007).

11
342
343 Zeng et al. (2015) in Ethiopia examined the implications of technology-induced economic surplus
344 change on poverty using cross-sectional household survey data. Although their approach accounts for
345 technology-induced price effect on poverty, it fails to consider other indirect effects (such as
346 employment creation along the value chain) with possible implications on poverty. To get around this
347 difficulty, we established a link between technology-induced change in economic surplus and poverty
348 reduction based on empirically estimated poverty elasticity to agricultural growth (. Empirically
349 estimated poverty elasticity accounts for all mechanisms (backward and forward linkages) by which
350 technology could impact poverty. Alene et al. (2009) also followed a similar approach. Assuming the
351 change in economic surplus as an additional income, the number of people who escaped poverty per
352 annum due to improved technologies used for maize production was estimated as follows:
353
∆𝐸𝑆
354 ∆𝑁 = ( × 𝛿) × 𝑁 (15)
𝐴𝑔𝐺𝐷𝑃
355
356 where ∆𝑁 is the number of people lifted out of poverty due to changes in economic surplus, ∆𝐸𝑆 is
357 the change in economic surplus due to adoption of maize production technologies (and represents the
358 value of additional production), 𝐴𝑔𝐺𝐷𝑃 is the value of agricultural GDP (and represents the value of
359 total agricultural production), 𝛿 is the elasticity of poverty to agricultural productivity obtained from
360 Thirtle et al. (2003), and 𝑁 is the number of poor people in the country.
361
362
363 3. Study area, data and descriptive statistics
364 The data for this study came from two waves of large comprehensive farm household surveys
365 conducted in Ethiopia. The International Maize and Wheat Improvement Center (CIMMYT)
366 undertook the survey in collaboration with the Ethiopian Institute of Agricultural Research (EIAR)
367 in 2010/11 and 2012/13. The survey covered 39 districts from the four regional states of Ethiopia
368 covering various agro-ecologies (Figure 1). The first round survey elicited information from 2,400
369 farm households, who had grown maize on 4,555 plots while the second round survey collected
370 information from 2,296 farm households, who had managed 3,907 maize plots. The attrition rate in
371 the second round survey was about 3.8%, i.e. 172 farm households dropped out of the survey in the
372 second round because they either had left the village or had deceased. Sample farm households were
373 selected using multi-stage stratified sampling. First, maize growing districts were identified in each

12
374 region. Second, 3 to 6 kebeles6 were randomly chosen in the selected districts according to their
375 population size. Third, 16 to 24 farm households in each selected kebele (proportional to their
376 population size) were randomly chosen for face-to-face interviews with the trained enumerators.
377
378 The surveys generated rich information pertaining to socioeconomic characteristics of farm
379 households, plot characteristics, technology use, input use, and output data at plot level. The dominant
380 maize varieties used by about 49% of sample households are hybrids, and about 6% of sample farm
381 households plant open pollinated varieties (OPV). Chemical fertiliser in this paper is a dummy
382 variable that indicates that a plot is treated with chemical fertiliser (DAP + Urea). Crop diversification
383 refers to a maize plot that is diversified with legumes, either spatially or temporally. In the study
384 areas, the widely diversified legume crop with maize is haricot bean.
385
386 The three improved technologies provide eight possible technology combination from which farm
387 households can choose. Table 1 presents the eight possible technology packages along with their
388 adoption rates in the two round surveys. Among the possible technology sets, a technology set that
389 comprises improved seed and chemical fertiliser is the most popular whereas combining improved
390 seed with crop diversification is the least popular. To learn about the interdependence of various
391 improved technology adoption decisions, we computed the marginal and conditional probabilities of
392 improved technologies (Table 2). Chemical fertiliser was the most widely adopted improved
393 technology followed by improved seed. Generally, the adoption of improved technologies showed
394 improvement in the second round survey. The survey results show that the adoption of improved seed
395 increases the odds of chemical fertiliser adoption and vice versa. This may suggest that farm
396 households are aware of the complementary nature of improved seed and chemical fertiliser. Our
397 results show that CSD increased the likelihood of chemical fertiliser and improved seed adoption.
398 This did not, however, necessarily imply that it increased the intensity of chemical fertiliser use
399 (Tables 3 and 4). On the other hand, the adoption of chemical fertiliser and improved seed does not
400 appear to encourage the uptake of crop diversification.
401
402 [Table 1]
403 [Table 2]

6
Kebeles are the lowest administrative unit in Ethiopia.

13
404 Tables 3 and 4 presents the intensity of input use, cost of production and yield pattern by technology
405 set for 2010/11 and 2012/13, respectively. Higher amount of fertiliser was applied on a technology
406 set with improved seed and chemical fertiliser and use of chemical fertiliser showed improvement in
407 the second round survey. Relatively lower amount of fertiliser was used on technology sets that
408 contained CSD. This is sensible, since legumes fix nitrogen and crowd out chemical fertiliser demand.
409 Incidentally, the use of chemicals (herbicide and pesticide) was small and further declined in the
410 second round survey. Survey results further showed that plots with only crop diversification received
411 lower amounts of fertiliser . Cropping system diversification, particularly alternating maize with
412 legume, ‒could break the cycle of pests and diseases, and suppress weeds. In so doing, it might reduce
413 the intensity of chemical use and thus reduce the costs of production.
414
415 [Table 3]
416 [Table 4]
417 Chemical fertiliser constituted the largest share of maize production cost followed by seed and labour.
418 This picture would, however, be different if one considers own inputs used in maize production (such
419 as family labour). Survey results further revealed that higher amounts of maize yield were harvested
420 on plots with all improved technology set, whereas the lowest was with a technology set that
421 comprised CSD only, though this led to lower per unit costs of production. On average, maize yield
422 showed improvement in the second round survey. Maize–legume intercrop, which is one form of
423 CSD in this study, generated additional revenue from legume production.
424
425 Three sets of explanatory variables in the adoption, production, and cost functions were identified:
426 household demographic and economic characteristics, household’s social connectedness, and
427 institutional and information access (Tables 5 and 6). Household demographic and economic
428 characteristics comprised age, sex and educational status of a household head, family size, livestock
429 size in tropical livestock unit (tlu), and plot characteristics. The adoption literature tends to
430 overemphasize on the characteristics of a household head and fails to account for the characteristics
431 of other household members that could have played an active role in the household decision-making
432 process and production activities. Gender still predominantly factors in labour division in rural
433 communities in many developing countries, including Ethiopia, with further implications on
434 technology choice and crop productivity. To account for the sex composition of a household, we also
435 considered the proportion of male household members between the ages of 14 and 50. Invoking the

14
436 same line of reasoning, we also accounted for the highest education completed by a household
437 member other than the head.
438
439 [Table 5]
440 [Table 6]
441
442 The second feature of variables was related to the social connectedness of a household. Market
443 failures are pervasive throughout developing economies. Imperfect competition and transaction costs
444 are prohibitive for farm households to engage in impersonalised markets. Farm households partly
445 address market failure problems by developing and maintaining personalised relationships for
446 exchange of information and inputs. In this study, we proxy personalised relationships (social
447 connectedness) by the number of years a household has lived in the village, the number of relatives a
448 household relies on in times of difficulty within the village, and a dummy variable that captures
449 whether a household belongs to the dominant language and religion in the district.
450
451 The third set of variables included walking minutes a farmer needs to reach the nearest main market
452 and agricultural extension office. These variables were assumed to represent transport and transaction
453 costs to access input and output markets and information. We also considered a dummy variable that
454 measured whether a farm household faced credit constraints. A farm household was assumed to be
455 credit-constrained if s/he needed credit but was unable to access it. Furthermore, we included a set of
456 dummy variables that represented whether a farm household had received information regarding the
457 technologies considered in this study.
458
459
460 3. Results and discussion
461
462 4.1 The direct effects of improved technologies
463 The observed difference in maize productivity and cost of production among the different technology
464 sets were not, however, necessarily attributed to technology set choice. The productivity and cost gap
465 could be partly driven by observed and unobserved farm household and plot characteristics. To
466 measure the separate effects of technology set choice, we estimated production and cost functions7

7
In estimating production and cost functions, a problem emerges on how to handle legumes in the case of maize–legume
intercrop, particularly allocating the total inputs to each crop. Two potential ways could be envisaged to address the
problem. The first approach could be to convert legume yield into maize equivalent using price as a weight and the maize-

15
467 using plot level data. In estimating production functions, we used conventional inputs such as labour,
468 fertiliser and chemicals (herbicide and pesticide) measured on per hectare basis as explanatory
469 variables. On the other hand, we included input prices and maize yield as explanatory variables in the
470 cost functions. As market imperfections are rampant in Ethiopia, we also added socioeconomic
471 characteristics as right hand side variables in both production and cost functions. We also included
472 time and regional dummy variables to capture temporal and spatial differences in agro-ecology, price
473 and institutions. We experimented the data with different functional forms and the linear functional
474 form fitted better both for production and cost data.
475
476 The primary objective of this paper is to estimate the farm level and aggregate level impact of
477 technologies adoption. We thus did not discuss the estimate of switching regression estimates but
478 results are presented in the Appendix (Tables 1A and 1B). However it is worth noting that our results
479 showed that the average values of time-varying explanatory variables collectively failed to have a
480 statistically significant impact on yield and cost of production (results not shown). This implies that
481 the exclusion of the average values of time varying explanatory variables 8 do not yield biased
482 estimates. However, the results could still be biased and inconsistent due to selection bias driven by
483 time-varying unobserved characteristics. We thus estimated production and cost functions by
484 including selection-correction terms estimated from a technology set choice model9. In some of the
485 outcome equations, the selection-correction terms turn out to be significant, indicating the presence
486 of sample selection in technology set choice.
487
488 Table 7 presents the average effects of technology sets (ATT) on yield and cost of production on
489 adopters. The econometric model results show that maize productivity was higher (5.46%) with crop
490 diversification technology set than with conventional technology set, even though the increment was
491 smaller compared to other improved technology sets. In the case of maize–legume intercrop, maize
492 occupies part of the cropped area, which could have an adverse effect on its yield. However, the total

equivalent yield of legume would be added to the actual maize yield to get the total maize yield. The total maize yield
would be then used for estimating maize production function. This could, however, result in a false increase in maize
production, which leads to a horizontal shift in maize supply curve. The sensible approach would thus be to consider
revenue generated from legume production as cost reduction for maize production, i.e. the revenue can serve to pay back
inputs used for maize–legume production, which would bring about a vertical shift in the maize supply curve.
8
We also ran the production and cost functions without taking into consideration that the average values of time varying
variables and qualitative results are similar as they include these variables. For the interest of space, we do not report the
results here.
9
To improve the efficiency of estimates, we ran technology choice model and production function simultaneously using
the Stata ado-file that Bourguignon et al., (2007) developed.

16
493 productivity of crop diversification could be higher if one also considers legume production.
494 Consistent with our expectations, improved technologies (such as improved maize seed and chemical
495 fertiliser) enhanced maize productivity by 12.97% and 24.4%, respectively. Moreover, the results
496 showed that combining both improved seed and chemical fertiliser could further enhance maize
497 productivity. Furthermore, the results indicate that the adoption of all improved technology set
498 enabled the farmers to reap the highest maize yield (49.91%) increase, suggesting a complementary
499 synergy. We did not estimate production and cost functions for a technology set with improved seed
500 and crop diversification, and crop diversification and chemical fertiliser, as the number of
501 observations with these technology sets was too small to produce credible estimates. However, we
502 have included the technology in the selection equation, thus the sample selection should be
503 minimised.
504
505 [Table 7]
506 Among the technology sets considered, crop diversification appears to be the cheapest technology set
507 to produce maize and reduces production cost by 38.29%. This is expected because we treated the
508 revenue generated from legumes as deductions from the total cost of production. It could also be
509 related to the fact that crop diversification controls pests, diseases and weeds, and legumes provide
510 nitrogen for maize production, thus reducing the demand for pesticides and chemical fertiliser, which
511 constitutes the highest amount of paid out cost for maize production. On the other hand, we found
512 that maize production with both improved maize variety and chemical fertiliser was the most
513 expensive, due to heavy dependence on purchased seed and chemical fertiliser. Our results also
514 suggest that maize production could be made relatively cheaper by including crop diversification as
515 part of a technology set.
516
517
518 4.2 Overall effects of improved technologies
519 In this section, we discussed the results of the economic surplus model, which takes into account for
520 both the direct and indirect effects technology adoption. At the heart of economic surplus analysis is
521 the estimation of a K-shift parameter. The direct effects of technology adoption (changes in yield and
522 cost of production per hectare) lead to a decline in per unit output production cost. The observed
523 equilibrium quantity and price are the combined effects of all technology sets, not for a single
524 technology set. As there is one market for maize, it isinvalid to estimate a k-shift parameter for each
525 technology set. Instead, an overall cost and yield impact have been calculated using the adoption rate
526 used as the weight to estimate the share contributed by specific technology combination. Accordingly,

17
527 the weighted treatment effects of technology sets on adopters’ yield and cost of production are about
528 29% and 48%, respectively.
529
530 Empirical literature provided for reasonable price elasticity of demand and supply (e.g., Abrar et al.,
531 2004). We accessed the observed maize production and price from FAOSTAT10. The k-shift
532 parameter was estimated to be about 16%, assuming a magnitude of the price elasticity of demand
533 and supply of 1 and 0.5, respectively. At national level, 16% cost reduction per kg of maize production
534 resulted in about $137.98 million change in total economic surplus per annum ($91.99 and $45.99
535 million increases in producer11 and consumer surpluses, respectively).12 This suggests that
536 (potentially) producers reap higher benefits from improved technologies than consumers.
537
538 We also estimated the number of people who were potentially lifted out of poverty as a result of
539 changes in economic surplus based on Thirtle et al. (2003) estimate of poverty elasticity to
540 agricultural growth in SSA. They showed that a 1% growth in AgGDP leads to a 0.72% reduction in
541 number of poor people (poverty count) in SSA. This is a general estimate for agriculture using cross-
542 country time series data, and not for a specific commodity. And it could be a conservative estimate
543 for the case of maize, given its paramount importance in the Ethiopian economy. Assuming the
544 estimate holds true in our context and considering ∆𝐸𝑆 as an additional income to AgGDP, we
545 estimated that the number of people lifted out of poverty per annum due to technology-led change in
546 economic surplus was about 178 thousand in the country13 or 2% of poor people ($ 1.90 poverty line)
547 in the country.
548
549 5. Conclusion and Way Forward
550
551 Improved technologies adopted for the production of staple crops such as maize could have profound
552 indirect effects on both producers and consumers through market. There have been limited studies
553 that have attempted to measure the overall benefits of improved technologies by taking into account

10
The average amount of maize production and price per kg of maize from 2009 to 2012 was 5,277,755 metric tonnes
and $0.199 USD, respectively.
11
The increase in producer surplus would be about $ 132.45 million if the economy were assumed to be open.
12 If we lower the price elasticity of supply to 0.4, the k-parameter would raise to about 27%. As a result, total
economic surplus would increase to about $245.14 million., and producers would claim the largest share from the
incremental economic surplus.
13
This computation is based on the average values of poor population in the country (22.8 million), a poverty head count
ratio (26%), and agriculture GDP (22.5 billion Ethiopian currency) during 2010/11 to 2012/13 using data from the
National Bank of Ethiopia.

18
554 their indirect effects. However, the focus of such studies has often been on improved seed varieties,
555 with particular emphasis on transgenic seeds. Moreover, earlier studies rely on experimental and
556 expert survey data, which just about reflect the reality of the farmers’ conditions. Using two rounds
557 of large comprehensive household survey data in Ethiopia, this study evaluated poverty and both the
558 direct and indirect effects of technology sets used for maize production, namely improved seed,
559 chemical fertiliser and crop diversification, using a combination of econometrics technique in a
560 multiple treatment effects and economic surplus approach.
561
562 The study measured the impacts of technology sets on yield and cost of production in a counterfactual
563 framework. To address sample selection and unobserved heterogeneity often associated with survey
564 data, we employed multinomial switching endogenous regression model and exploited the panel
565 nature of the data along the lines of Mundlak (1978). Our results support the presence of unobserved
566 factors that affect both technology set choice and outcome variables (yield and cost of production).
567 The results also show that producing maize with all technology sets provides the highest payoff with
568 respect to yield, while diversifying maize with legumes is the cheapest option for maize production.
569
570 We also built an economic surplus model to estimate the indirect effects of technology sets using
571 parameters from econometric estimation. Per kilogram cost of maize production shrunk by about
572 16%, on average, as a result of the technology sets. Given the current market nature and volume of
573 production, technology-induced cost reduction led producer and consumer surpluses to swell by about
574 $91.99 and $45.99 millions per annum, respectively; furthermore, we found that the technology sets
575 reduced the number of poor people by about 178 thousand per annum.
576
577 The caveats of the study are appropriate. First, there are limitations on the way technologies are
578 measured. In our study, improved seed technology was an indicator variable that differentiated
579 whether a seed is a local variety or improved variety. However, both improved and local seeds
580 comprised different seed varieties with varying degrees of productivity and seed price. Similarly,
581 chemical fertiliser technology was a dummy variable that denoted whether chemical fertiliser is
582 applied on a plot without regard to the intensity of application. Crop diversification was also a dummy
583 variable that indicated whether maize crop was diversified with legumes, but this failed to
584 differentiate the type of diversification (temporal or spatial) and intensity of diversification
585 (proportion of area covered by legumes). Second, the economic surplus analysis was based on the
586 impacts of technologies on crop productivity and cost of production. Technology adoption could,

19
587 however, provide additional benefits to producers in the form of risk management (Kassie et al. 2015).
588 Thus, our results should be taken as indicative rather than definitive. Nevertheless, our results do
589 confirm the positive impacts of technologies associated with maize production on poverty alleviation
590 in Ethiopia.
591
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698
699
700

701

702 Figure 1. Distribution of sample districts where the survey was conducted.

23
Table 1: Adoption rates of technology sets (plot level)
Technology Crop diversification Chemical Improved seed (I) Frequency
set (D) fertilizer(F)
D1 D0 F1 F0 I1 I0 2010-11 2012-13
D0 F0 I0    30.94 24.36
D1 F0 I0    2.42 3.72
D0 F1 I0    12.9 10.58
D0 F0 I1    9.31 7.83
D1 F1 I0    1.78 1.98
D1 F0 I1    1.17 1.18
D0 F1 I1    35.54 40.74
D1 F1 I1    5.94 9.6

Note: Number of maize plots are 4555 and 3907, respectively in 2010-11 and 2012-13.
Table 2: Marginal and conditional probabilities
Crop diversification Chemical fertilizer Improved seed
2010-11 2012-13 2010-11 2012-13 2010-11 2012-13

P(AT=1) 0.11 0.16 0.56 0.63 0.52 0.59

P(AT=1/AD=1) 100 100 0.68 0.70 0.63 0.65

P(AT=1/AF=1) 0.14 0.18 100 100 0.74 0.80

P(AT=1/AI=1) 0.14 0.18 0.80 0.85 100 100

P(AT=1/AD=1 & AF=1 ) 100 100 100 100 0.43 0.52

P(AT=1/AD=1 & AI=1 ) 100 100 0.43 0.53 100 100

P(AT=1/AF=1 & AI=D ) 0.07 0.11 100 100 100 100

2
 Mean values by technology sets
D0 F0 I0 D1 F0 I0 D0 F1 I0 D0 F0 I1 D1 F1 I0 D1 F0 I1 D0 F1 I1 D1 F
Maize yield (kg/ha) 2,128 1,910 2,548 2,138 2,379 2,163 2,912 3,60
Fertilizer (kg/ha 0 0 160 0 126 0 176 173
Chemicals (kg/ha) 1.16 0.19 7.93 2.66 0.14 0.07 2.66 3.96
Labour (man days /ha) 106 81 106 93 111 85 96 101
Oxen frequency 3.51 2.91 3.93 5.01 3.69 3.43 3.99 3.66
Total cost (Birr/ha) 34.53 68.75 1,226.3 152.85 1,044.69 215.6 1,630.9 1,77
Fertilizer cost (Birr/ha) 0 0 1,131.3 0 919.31 0 1,290.1 1,24
Chemical cost (Birr/ha) 6.99 1.28 14.32 11.97 8.17 6.72 14.08 17.8
Seed cost (Birr/ha) 7.39 25.33 29.06 93.64 41.11 183.48 211.35 361.
Labour cost (Birr/ha) 20.09 41.52 86.15 46.8 76.1 25.41 114.56 146.
Legume revenue (Birr/ha) 0 512.1 0 0 1,158.48 378.68 0 1,20
Table 3: Input use, cost of production and maize yield by technology sets in 2010-11
Note: Birr is Ethiopia local currency (1 USD ≈ 16.11 Birr during 2010-11).

3
 Table 4: Input use, cost of production and maize yield by technology sets in 2012-13

Mean values by technology sets

D0 F0 I0 D1 F0 I0 D0 F1 I0 D0 F0 I1 D1 F1 I0 D1 F0 I1 D0 F1 I1 D1 F1 I1
Yield (kg/ha) 2,331 2,104 2,867.5 2,879 3,228. 2,711 3,254 3,250.15
Fertilizer (kg/ha 0 0 212 0 199 0 217 178
Chemicals (kg/ha) 0.096 0.023 0.20 0.226 0.03 0.036 0.445 0.335
Labour (man days /ha) 124 170 130 112 152 109 115 132
Oxen frequency 3.225 3.29 3.776 3.704 3.571 3.326 3.817 3.69
Total cost (Birr/ha) 131 165 3,343 662 3,240 715 3,928 3,514
Fertilize cost (Birr/ha) 0 0 2,925 0 2,877 0 3,014 2,553
Chemical cost (Birr/ha) 11.65 2.9 20.64 13.35 3.84 3.3 42.08 9.79
Seed cost (Birr/ha) 40.67 40.2 205.21 489.77 253.19 446.81 573.89 721.85
Labour cost (Birr/ha) 78.32 121.89 192.16 159.29 101.69 264.78 297.73 228.87
Legume revenue (Birr/ha) 0 1,441.64 0 0 2,227.39 1,629 0 2,122

Note: Birr is Ethiopia local currency (1 USD ≈ 16.11 Birr during 2010-11).

4
1 Table 5: Descriptive statistics for explanatory variables used in the analysis in 2010-11

Description of variables Mean values

D0 F0 I0 D1 F0 I0 D0 F1 I0 D0 F0 I1 D1 F1 I0 D1 F0 I1 D0 F1 I1 D1 F1 I1
Household characteristics
SEXHEAD 1 if head is male, 0 for female 0.925 0.918 0.913 0.917 0.901 0.906 0.964 0.941
SEXCOM the proportion of males in a household 0.245 0.243 0.247 0.27 0.276 0.281 0.255 0.245
EDHEAD years of education by a head 2.69 2.818 2.639 2.746 3.222 3.698 3.595 3.644
HEDUC the highest education completed by 5.346 4.927 5.886 5.822 6.852 7.283 6.186 5.804
household member other than a head
AGEHEAD age of a head 43.809 41.236 43.078 42.571 42.568 43.17 41.303 39.952
MANEQ the size of a household in man equivalent 2.981 2.818 3.025 3.133 3.44 3.853 3.173 3.076
Social connections
NYEAR the number of years a household has lived 38.114 36.091 37.454 36.031 36.654 38.679 35.294 34.357
in the village
NRELATIV the number of relatives of household 5.26 4.8 5.618 5.147 4.862 8.623 5.418 7.107
has within a village
DOMINT 1 if a household belongs to a dominant 0.719 0.8 0.759 0.676 0.813 0.792 0.694 0.73
language and religion in the village, 0 otherwise
Household assets
OTLU the size of oxen a household owns in tlu 1.912 1.309 1.828 1.726 2.136 2.264 2.14 1.663
NOTLU the size of non-oxen livestock a household 3.078 2.436 2.793 3.022 3.479 5.1 3.531 2.915
owns in tlu
FSIZE farm size in ha 2.691 2.678 2.374 2.359 2.6 2.659 2.675 2.218
ASSET major household and farm equipment value 1,080.07 867.859 1,612.69 1,649.87 1,219.09 3,207.24 1,758.34 2,112.52
in Birr
Institutional and information access
MARET walking distance to main market in mins 96.153 92.936 91.553 97.633 90.383 107.736 95.951 104.678
AEXT walking distance to agricultural extension in 30.468 32.981 26.741 29.582 31.538 34.358 28.286 27.071
mins
CREDIT 1 if a household needed credit but was not 0.124 0.155 0.176 0.215 0.222 0.283 0.287 0.419
able to get, 0 otherwise

5
 IVART 1 if a household received information on 0.843 0.773 0.896 0.842 0.914 0.868 0.88 0.926
improved maize varieties, 0 otherwise
IROT 1 if a household received information on 0.763 0.709 0.773 0.728 0.753 0.642 0.772 0.767
crop rotation, 0 otherwise
IINTER 1 if a household received information on 0 0 0 0 0 0 0 0
intercrop, 0 otherwise
Plot characteristics
PLTDT walking distance to plot from homestead 9.176 6.255 11.781 14.052 14.538 11.849 14.155 14.633
PLTSIZ the size of plot in hectares 0.368 0.391 0.398 0.473 0.493 0.497 0.548 0.514
OWN 1 if a household owns a plot, 0 otherwise 0.864 0.909 0.817 0.837 0.778 0.887 0.749 0.848
FERTILITY 1-good, 2-medium, 3-poor 1.345 1.573 1.646 1.541 1.494 1.679 1.479 1.604
SLOPE 1-gentle, 2-medium, 3-steep 1.212 1.382 1.404 1.261 1.259 1.226 1.412 1.286
STRESS 1 if the plot was subject to stress, 0 0.286 0.264 0.289 0.432 0.316 0.434 0.285 0.404
otherwise
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

6
20 Table 6: Descriptive statistics for explanatory variables used in the analysis in 2012-13

Description of variables Mean values

D0 F0 I0 D1 F0 I0 D0 F1 I0 D0 F0 I1 D1 F1 I0 D1 F0 I1 D0 F1 I1 D1 F1 I1
Household characteristics
SEXHEAD 1 if head is male, 0 for female 0.927 0.952 0.937 0.895 0.961 0.957 0.955 0.968
SEXCOM the proportion of males in a household 0.263 0.238 0.259 0.251 0.283 0.243 0.271 0.255
EDHEAD years of education by a head 2.83 2.738 2.524 2.656 2.545 3.022 3.342 3.326
HEDUC the highest education completed by 5.914 6.069 6.299 5.869 5.662 5.304 6.494 6.201
household member other than a head
AGEHEAD age of a head 46.249 47.076 45.743 44.862 45.727 46.109 43.364 44.099
MANEQ the size of a household in man equivalent 3.213 3.262 3.261 3.212 3.179 3.363 3.341 3.434
Social connections
NYEAR the number of years a household has lived 39.896 39.552 38.845 37.121 37.753 38.739 37.693 37.668
in the village
NRELATIV the number of relatives of household 7.176 5.731 9.223 8.698 9.078 7.196 9.625 13.789
has within a village
DOMINT 1 if a household belongs to a dominant 0.704 0.741 0.735 0.703 0.753 0.717 0.693 0.751
language and religion in the village, 0 otherwise
Household assets
OTLU the size of oxen a household owns in tlu 1.546 1.579 1.724 1.66 1.675 1.63 1.905 1.539
NOTLU the size of non-oxen livestock a household 3.066 3.019 3.064 3.26 2.864 3.283 3.518 3.182
owns in tlu
FSIZE farm size in ha 2.252 2.447 2.27 2.237 1.991 2.69 2.304 1.891
ASSET major household and farm equipment 1,834.59 1,463.94 2,246.50 3,844.18 1,279.96 4,700.70 3,181.54 2,659.47
value in Birr
Institutional and information access
MARET walking distance to main market in mins 98.955 89.703 97.444 95.511 92.532 94.13 87.413 90.639
AEXT walking distance to agricultural extension in 32.577 25.434 32.842 34.807 35.104 35.652 29.492 29.295
mins
CREDIT 1 if a household needed credit but was not 0.421 0.366 0.388 0.518 0.416 0.652 0.404 0.524
able to get, 0 otherwise

7
 IVART 1 if a household received information on 0.851 0.931 0.883 0.918 0.896 0.957 0.927 0.89
improved maize varieties, 0 otherwise
IROT 1 if a household received information on 0.722 0.779 0.779 0.761 0.701 0.848 0.806 0.701
crop rotation, 0 otherwise
IINTER 1 if a household received information on 0.543 0.703 0.587 0.551 0.636 0.609 0.599 0.642
intercrop, 0 otherwise
Plot characteristics
PLTDT walking distance to plot from homestead 8.636 6.462 10.532 10.003 5.247 16.87 11.967 13.091
PLTSIZ the size of plot in hectares 0.302 0.299 0.364 0.372 0.359 0.452 0.472 0.456
OWN 1 if a household owns a plot, 0 otherwise 0.943 0.959 0.854 0.879 0.974 0.913 0.825 0.919
FERTILITY 1-good, 2-medium, 3-poor 1.505 1.607 1.556 1.459 1.623 1.587 1.56 1.519
SLOPE 1-gentle, 2-medium, 3-steep 1.374 1.607 1.374 1.203 1.39 1.283 1.357 1.299
STRESS 1 if the plot was subject to stress, 0 0.378 0.345 0.35 0.38 0.286 0.326 0.355 0.441
otherwise
21
22

8
23 Table 7: Average treatment effects(ATT) of improved technology sets on productivity and cost of production

Yield average treatment effect Cost average treatment effect

A B C(A-B) D E F(D-E)
Technology set j Actual/observed maize yield if Counterfactual maize Adoption Actual/observed Counterfactual maize Adoption effects,
farm households did yield if farm effects, kg/ha) maize production cost production cost if farm (ETB/ha)
adopt technology set j households did if farm households did households didn’t
(kg/ha) not adopt adopt technology set j adopt technology set j
technology set j (ETB/ha) (ETB/ha)
(kg/ha)
D1F0V0 2325.869 2213.374 112.495 2804.394 4302.927 -1498.53***
D0F1V0 2564.400 2062.022 502.378*** 6181.154 4267.929 1913.225***
D0F0V1 2291.065 2023.935 267.130*** 4447.755 4061.163 386.592**
D0F1V1 2986.895 2036.240 950.655*** 7782.954 4513.746 3269.208***
D1F1V1 3275.827 2248.121 1027.706*** 7499.49 4979.65 2519.84***
24
25 Note *** and **denotes significance level at 1 % and 5% respectively.
26
27
28
29
30
31
32
33
34
35
36

9
37 Table 1A: Endogenous switching regression model for production functions
38
Estimated Coefficients
D0 F0 I0 D1 F0 I0 D0 F1 I0 D0 F0 I1 D1 F1 I0 D0 F1 I1 D1 F1 I1
Household characteristics
SEXHEAD 201.66 -1092.15 187.64 83.75 8550.54 -102.07 157.34
SEXCOM 484.79 -3275.13 -753.91 1169 -3861.93 594.95 468.24
EDHEAD -41.57 -10.26 100.34 -52.71 -25.86 2.44 -40.22
HEDUC 16.61 -180.17 9.12 -14.25 -223.19 -55.95** -70.46
AGEHEAD 24.81 48.01 51.84 -16.06 71.5 11.68 47.19
MANEQ 19.77 640.97 70.67 125.93 -968.49 10.43 111.36
Social connections
NYEAR -12.05 -52.98 -27.4 -6.89 77.36 -16.81** -33.42*
ln(NRELATIV) 25.58 52.05 36.29 63.05 -63.44 36.41* -99.91
DOMINT 165.15 -427.53 271.58 211.54 4506.9 -391.47** -501.32
Household assets
OTLU 144.52* -325.37 186.56 21.82 2126.81 -39.89 -110.68
NOTLU -29.45 -115.52 103.98 -57.41 837.47 6.87 -35.31
FSIZE 26.1 -177.83 -109.19 -178.38 741.11 -91.48* -119.18
ln(ASSET) -123.78 593.87 -5.2 164.77 -732.1 286.84*** 274.92
Institutional access
ln(MARET) -127.22* 87.02 -107.47 -26.75 -1595.61 34.4 77.13
ln(AEXT) 35.82 -277.54 157.42 157.5 738.01 -10.81 -472.62**
CREDIT -325.9 286.43 296.93 139.88 5991.99 -80.32 -363.18
Plot characteristics
PLTDT -6.00 6.31 -4.3 -0.74 -57.97 -0.06 6.76
PLTSIZ 1577.04*** -2411.74 -106.13 5.78 -375.45 -317.15 -1467.11
OWN 400.7 939.54 -87.61 576.31 2318.58 470.09** -255.21
FERTILITY -195.85 292.11 81.15 -99.38 -967.47 -243.98* -357.59
SLOPE 69.66 -523.35 -284.93 -303.1 -1982.81 -386*** -254.91
STRESS -850.55*** 1336.82 1115.28** -707.61 -4146.48 147.03 24.77
Regional dummies (Tigray region as a base category)

10
 Amhara 883.26 0 11.74 -210.42 0 1131.24*** -834.44
Oromia 1250.71 -964.37 394.16 0.57 644.18 1802.35*** 574.32
Benshinagul Gumuz 1338.57 331.26 328.29 0 4536.71 1448.16*** -953.09
SNNP 1183.71 -1235.21 -114.19 394.03 3829.5 1461.51*** -121.2
Time dummy (2010-11 = 0; -18.77 -922.29 -218.4 176.83 -129.39 -244.41** -486.44
2012-13 = 1)
Input variables
Labour 4.93*** 5.82** 4.45** 10.67*** -10.02 5.92*** 2.6
Chemicals 2.63 -30.75 12.11 0.32 -2036.57 -0.29 -2.22
Average values of time varying
explanatory variables Yes Yes Yes Yes Yes Yes Yes
Inverse mills ratio (8 variables) Yes Yes Yes Yes Yes Yes Yes
Constant 2797.29 -2200.08 4290.79 -5073.55 -22888.9 3732.79*** 3450.82
39
40

11
41
42 Table 1B: Switching endogenous regression estimates for cost functions
43
Estimated coefficients
D0 F0 I0 D1 F0 I0 D0 F1 I0 D0 F0 I1 D1 F1 I0 D0 F1 I1 D1 F1 I1
Household characteristics
SEXHEAD -345.18 5820.57 -335.65 -444.6 -3469.68 49.94 3156.42
SEXCOM -205.64 2985.44 718.54 528.28 12092.3 990.51 329.68
EDHEAD 1.19 -751 44.23 8.56 -436.79 121.23** 80.57
HEDUC 14.53 171.91 -5.75 -191.29 -367.75 -21.21 -23.53
AGEHEAD -0.74 115.72 31.96 33.31 48.84 5.67 5.14
MANEQ 80.34 -1031.28 249.04 495.46 -1153.44 110.7 -104.14
Social connections
NYEAR 4.8 81.44 -2.53 -5.49 198.48 -4.62 23.08
ln(NRELATIV) 68.83* -154.26 29.98 97.62 999.26 46.69 -134.48
DOMINT 329.03 58.86 206.47 -63.41 2694.85 -418.69 733.65
Household assets
OTLU -61.28 -683.78 231.25 -379.25 445.18 187.01 504.96
NOTLU 7.11 561.99 72.59 -48.67 808.64 126.5 68.67
FSIZE -266.74*** 836.34 -152.86 -206.89 553.76 -125.1 -93.44
ln(ASSET) 253.46* -1712.29 231.23 -443.84 -813.73 390.74** -203.54
Institutional
ln(MARET) 122.15 -1027.68 -15.16 478.24* -430.22 147.9 201.39
ln(AEXT) -21.95 -1259.17 173.27 -42.01 2249.71 243.41* 526.07
CREDIT -280.47 -7049.98 -515.26 -561.51 -7801.9 -127.36 -967.25
Plot characteristics
PLTDT 6.4 -47.76 1.93 8.5 56 -0.57 -17.32
PLTSIZ -1388.64* -8036.91 -1725.39 -3500.87*** -4032.84 -1496.37*** -1967.81
OWN 409.39 -865.33 504.46 1714.99* 516.98 380.97 972.65
FERTILITY -34.69 606.66 -90.51 -910.39** 2229.1 -60.46 -186.87
SLOPE -296.17 5387.33 -395.99 -1292.76 -5428.01 -855.42*** -513.27
STRESS -600.1 -4408.35 -776.39 -546.28 -4086.16 -413.9 -316.08

12
 Regional dummies (Tigray region as a base category)
Amhara -2471.18 0 -2113.65 -3013.53 -40588.3 5937.57** -9644.46
Oromia -2081.24 1679.7 -1937.73 -729.26 -35747.6 6611.89* -4525.87
Benshinagul Gumuz -1984.87 8757.25 -751.09 1579.23 -6817.86 5575.76* -450.85
SNNP -266.34 -12242.3 -2292.31 0 -34838.8 6951.48* -4071.35
Time dummy (2010-11 = 0; 3093.11*** 5773.32 3177*** 2875.61** 2107.82 4732.66*** 7262.53***
2012-13 =1)
ln(yield) 341.87*** 2574.51** 478.32* 292.8*** -215.44 683.75*** 1966.41
Input prices
Labour wage (Birr/man day) 15.08** 19.92 14.13 4.69 -25.82 10.86*** 17.37
Fertilizer price (Birr/kg) -57.98 -443 68.7 81.65 -329.21 -71.2 -387.63**
Seed price (Birr/kg) -40.22** -146.8 33.24 -23.75 17.47 49.37*** -10.17
Chemical price (Birr/lt) 4.21** 14.28 0.64 -4.79 17.67 2.11** -0.59
Average values of time varying
explanatory variables Yes Yes Yes yes Yes Yes Yes
Inverse mills ratio (8 variables) Yes Yes Yes Yes Yes Yes Yes
Constant -98.78 -7985.15 -1684.04 -2581.9 -35632.5 -13062*** -10016.1
44

13
45

14