Publication: A Conceptual Model of Incomplete Markets and the Consequences for Technology Adoption Policies in Ethiopia
Loading...
Published
2013-10
ISSN
Date
2014-02-04
Author(s)
Gurara, Daniel Zerfu
Editor(s)
Abstract
In Africa, farmers have been reluctant to take up new varieties of staple crops developed to boost smallholder yields and rural incomes. Low fertilizer use is often mentioned as a proximate cause, but some believe the problem originates with incomplete input markets. As a remedy, African governments have introduced technology adoption programs with fertilizer subsidies as a core component. Still, the links between market performance and choices about using fertilizer are poorly articulated in empirical studies and policy discussions, making it difficult to judge whether the programs are expected to generate lasting benefits or to simply offset high fertilizer prices. This paper develops a conceptual model to show how choices made by agents supplying input services combine with household livelihood settings to generate heterogeneous decisions about fertilizer use. An applied model is estimated with data from a panel survey in rural Ethiopia. The results suggest that adverse market conditions limit the adoption of fertilizer-based technologies, especially among resource-poor households. Farmers appear to respond to market signals in the aggregate and this provides a pathway for subsidies to stimulate demand. However, the research suggests that lowering transaction costs, through investments in infrastructure and market institutions, can generate deeper effects by expanding the technologies available to farmers across all pricing outcomes.
Link to Data Set
Citation
“Gurara, Daniel Zerfu; Larson, Donald F.. 2013. A Conceptual Model of Incomplete Markets and the Consequences for Technology Adoption Policies in Ethiopia. Policy Research Working Paper;No. 6681. © World Bank. http://hdl.handle.net/10986/16895 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication South Africa’s Fragmented Cities: The Unequal Burden of Labor Market Frictions(Washington, DC: World Bank, 2026-01-08)Using high-resolution administrative, census, and satellite data, this paper shows that South African cities are characterized by spatial mismatches between where people live and where jobs are located, relative to 20 global peers. Areas within 5 kilometers of commercial centers have 9,300 fewer residents per square kilometer than expected, which is 60 percent below the global median. Poor, dense neighborhoods are most affected. In Johannesburg, a 10-percentile increase in distance from the nearest business hub corresponds to a 3.7-percentile drop in asset wealth (a proxy of household wellbeing) and 4.9-percentile drop in employment. In Cape Town, the declines are 4.0 and 3.7 percentiles, respectively. Employment is 87 percent lower in the poorest decile than the richest in Johannesburg and 61 percent lower in Cape Town. These findings suggest that South Africa’s spatial organization of people and economic activity constrains agglomeration and reinforces inequality. This methodology provides a scalable and standardized data-driven framework to analyze spatial accessibility and agglomeration frictions in complex, data-constrained urban systems.Publication The Evolution of Local Participatory Democracy in Nepal(Washington, DC: World Bank, 2025-11-05)Nepal is, according to its constitution, among the world’s most decentralized countries, with a long and complex tradition of local-level public participation. This paper traces the evolution of Nepal’s modern participatory institutions, examining the extent to which they are “induced” by external interventions versus being “organically” rooted in indigenous practices. The paper identifies three broad phases: an initial focus on participation in project implementation; a subsequent phase that expanded citizen engagement; and a third phase of citizen empowerment, culminating in the 2015 federal constitution, which granted unprecedented local autonomy. The analysis yields five key findings. First, over the past 50 years, successive reforms have progressively expanded opportunities for citizens to influence local decision-making. Second, these reforms have integrated traditional participatory mechanisms into formal institutions of local government. Third, although central-level initiatives exist, most participatory platforms continue to operate at the local level. Fourth, the federal constitution has created a new landscape of local democracy, embedding autonomy and accountability. Fifth, although they are still valued in many ethnic and territorial communities, traditional participatory practices are gradually disappearing. The paper concludes by offering policy recommendations to help donor agencies and governments strengthen Nepal’s democratic trajectory. It argues that effective interventions should build on Nepal’s deep participatory traditions while recognizing the constitutional reality of far-reaching local autonomy.Publication Institutional Capacity for Policy Implementation: An Analytical Framework(Washington, DC: World Bank, 2026-01-07)State capacity is an important prerequisite for policy implementation, yet at the country level it is difficult to measure, assess, and reform. This paper proposes a focus on institutional capacity: the ability of public institutions to implement the specific policy mandates for which they are responsible. Based on a review of existing literature, the paper defines the different dimensions that compose institutional capacity and groups them into two cross-cutting categories: organizational dimensions (personnel, financial resources, information systems, and management practices) and governance dimensions (transparency, independence, and accountability). The paper proposes measures for organizational and governance dimensions using existing data, shows intra-institutional variation of these measures within countries, and discusses how new data could be collected for better measurement of these concepts. Finally, the paper illustrates how the framework can be used to diagnose the sources of common problems related to weak policy implementation.Publication Closing the Gender Gap in Entrepreneurship: Overcoming Challenges in Law and Practice for Female Entrepreneurs(Washington, DC: World Bank, 2026-01-07)Despite significant strides toward gender equality, women around the world continue to encounter systemic obstacles that hinder their entrepreneurial success. This paper systematically reviews the literature on the barriers female entrepreneurs face and the solutions proposed to overcome these challenges. It discusses institutional factors, financial factors, human capital factors, and social and cultural factors. The literature overview is complemented by a series of stylized facts that illustrate how overcoming some of these existing barriers is correlated with improved women’s entrepreneurship and female labor force participation, drawing on the World Bank’s Women, Business and the Law database as well as the World Bank’s Enterprise Surveys. The findings underscore the need for creating an enabling environment where women can thrive as entrepreneurs.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Agribusiness Indicators : Kenya(Washington, DC, 2013-01)The importance of agriculture in the economies of sub-Saharan African countries cannot be overemphasized. With agriculture accounting for about 65 percent of the region's employment and 75 percent of its domestic trade, significant progress in reducing hunger and poverty across the region depends on the development and transformation of the agricultural sector. Transforming agriculture from largely a subsistence enterprise to a profitable commercial venture is the prerequisite and driving force for accelerated development and sustainable economic growth in sub-Saharan Africa. The rationale behind the development of agribusiness indicators (ABIs) is to construct indicators for specific factors to support successful, effective private sector involvement in agriculture. The indicators can be used to benchmark and monitor performance in the agricultural sector over time and across countries. The resulting information can provoke knowledge flows and meaningful dialogue among policy makers, government officials, donors, private sector actors, as well as other stakeholders in the agricultural sector. This study is predicated on the fact that agriculture is the backbone of the economies of most countries in sub-Saharan Africa, including Kenya. The ultimate aim is to stimulate debate and dialogue among policy makers in specific African countries to engender change and reform in areas where investment is needed to leverage agribusiness and economic development. This study relied heavily on an extensive secondary data collection and literature review, supplemented by informal surveys to solicit information from a broad spectrum of stakeholders and actors in Kenya's agricultural sector. The review and interviews focused on the factors that the agribusiness indicators team determined to be the most critical for agribusiness development across sub-Saharan Africa, based on extensive scoping missions in three pilot countries (Ghana, Ethiopia, and Mozambique). This report is organized into following chapters: chapter one gives introduction; chapter two presents ABI methodology; chapter three presents findings on the success factors and indicators; and chapter four gives concluding remarks.Publication The Cost of Land Degradation in Ethiopia : A Review of Past Studies(Washington, DC, 2007-04)This paper reviews past studies on the costs of land degradation in Ethiopia, with a view to drawing implications for policies, programs, and future research on sustainable land management (SLM). Given the wide range of methods and assumptions used in the studies, their findings concerning annual costs of land degradation relative to agricultural gross domestic product (AGDP) are of remarkably similar magnitude. The minimum estimated annual costs of land degradation in Ethiopia range from 2 to 3 percent of AGDP. This estimate does not take into account downstream effects such as flooding, suggesting that actual total costs are possibly much higher than the 2-3 percent range. A onetime occurrence of a 2-3 percent reduction in AGDP might be manageable, but the cumulative losses to land degradation over time are very serious for an agriculturally based economy. Such cumulative losses represent a significant drag on rural growth and poverty reduction and jeopardize long-term, sustainable development.Publication Ukraine Agricultural Competitiveness(Washington, DC, 2008-06)The agri-food sector is an important part of the Ukrainian economy. Agriculture could make an even larger contribution to economic growth and the vitality of rural areas in Ukraine than is currently the case. Ukraine has the agro-climatic potential to be a major player on world agricultural markets. Agricultural competitiveness in Ukraine also suffers from inadequate systems to test and document food product quality and food safety. Ukraine's food safety control system is complicated and characterized by fragmented and often overlapping jurisdictions. Many standards applied in Ukraine are inconsistent with World Trade Organization (WTO) provisions, with standards established by the responsible international bodies and with accepted practices in international trade. Without improvements towards an efficient and internationally recognized food quality and safety control system, Ukrainian agriculture will find it increasingly difficult to sell into international markets and its products will not be able to command top prices. The ban on Ukrainian meat, eggs, fish, cheese, milk and butter imposed by Russia in mid-January 2006 provides an example of the disruptions that can result. This negative impact on competitiveness will be increasingly acute for more perishable products, higher-processed products and products that combine different agricultural raw materials - in other words many high-value added products. Policy reforms and investments could greatly increase the competitiveness of Ukrainian agriculture. In the policy sphere, greater restraint should be exercised in the area of trade, market and price policy. Ad hoc intervention on agricultural markets should be reduced. Accession to the WTO is an important and encouraging signal that policy makers are willing to adopt less intrusive and more stable trade, market and price policies. In the investment sphere, priorities include food safety monitoring and certification systems, trade infrastructure and logistic capacity, food chain management, technical advisory and market information systems, streamlined and transparent customs procedures, land markets, and research and education institutions.Publication Agribusiness Indicators(World Bank, Washington, DC, 2012-04)Because agriculture is the economic backbone of most countries in Sub-Saharan Africa, including Ethiopia, any meaningful sustainable development program in the continent must therefore be anchored in the sector. The concept for this study on agribusiness indicators was based on the vital role that agribusiness plays in agricultural development. The study focuses on agribusiness indicators (ABI) to identify and isolate the determining factors that lead private investors and other stakeholders to participate in agribusiness and to engage in discourse regarding its development. A more thorough empirical understanding of these determinants in turn can usefully inform the types of policy reforms that can promote agribusiness in Africa. In Ethiopia, the ABI team focused on the following success factors: a) access to critical factors of production of certified hybrid seeds, fertilizer, and mechanical input; b) enabling environment in terms of access of credit and transportation; and c) government expenditures on agriculture, and trade and regulatory policies that currently influence the agribusiness environment. The factors and indicators that the research team has included in this study are not exhaustive but rather are intended to serve as a pilot that could be scaled up to include more variables and countries. The findings of the study revealed the dominant role of the government in the seed and fertilizer markets. In the seed sub-sector, perennial shortages of both basic and certified seeds have greatly limited agricultural productivity in Ethiopia.Publication Are Women Less Productive Farmers?(World Bank, Washington, DC, 2015-04)African governments and international development groups see boosting productivity on smallholder farms as key to reducing rural poverty and safeguarding the food security of farming and non-farming households. Prompting smallholder farmers to use more fertilizer has been a key tactic. Closing the productivity gap between male and female farmers has been another avenue toward achieving the same goal. The results in this paper suggest the two are related. Fertilizer use and maize yields among smallholder farmers in Uganda are increased by improved access to markets and extension services, and reduced by ex ante risk-mitigating production decisions. Standard ordinary least squares regression results indicate that gender matters as well; however, the measured productivity gap between male and female farmers disappears when gender is included in a list of determinants meant to capture the indirect effects of market and extension access.
Users also downloaded
Showing related downloaded files
Publication Rent Imputation for Welfare Measurement : A Review of Methodologies and Empirical Findings(World Bank Group, Washington, DC, 2014-11)As well acknowledged in the literature, housing is often the dominant consumption good for most households. As such, it should be included in a comprehensive welfare aggregate to measure people's living standards accurately. However, assigning a value to the flow of the dwelling for homeowners and nonmarket tenants is problematic. Over the last decades several estimation techniques have been proposed and implemented by practitioners covering from very simple to sophisticated approaches. This paper provides an extensive review of different methods to impute rent, commonly used for welfare analysis. It also gives an overview of how this problem has been addressed by other economic domains, namely national accounts, price indices, purchasing power parities, and taxation. Finally, after setting up a theoretical framework, the paper summarizes the empirical findings about the distributional impact of including imputed rents in welfare aggregates.Publication Reforming Agricultural Trade for Developing Countries : Volume 2. Quantifyng the Impact of Multilateral Trade Reform(Washington, DC: World Bank, 2007)Reforming agricultural trade for developing countries is a two-volume set. The first volume is subtitled Key issues for a pro- development outcome of the Doha Round, and it is focused on specific concerns that are being encountered in the agricultural negotiations, and on strategies for dealing with them to arrive at a final agreement that will significantly spur growth and reduce poverty in developing countries. The companion volume is subtitled Quantifying the impact of multilateral trade reform. It comprises chapters that take different approaches to modeling trade reform and quantifying the resulting benefits and costs to various players in the negotiations. The study explains the differences in results that come out of these different approaches, and compares them to some other recent estimates of the gains from global trade reform.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Berlin Workshop Series 2008 : Agriculture and Development(Washington, DC : World Bank, 2008)The workshop brings diverse perspectives from outside the World Bank, providing a forum in which to exchange ideas and debate in the course of developing the World Development Report (WDR). Participants at the 2006 Berlin Workshop gathered to discuss challenges and successes pertaining to agriculture and development. Agriculture is the major sector contributing to economic development in many poor countries. Three out of every four poor people in developing countries live in rural areas. As globalization accelerates, development policies should tackle future challenges in agriculture arising from the scarcity of natural resources and globalization. The author highlights the paramount importance of redefining the framework for agriculture, providing us with food for thought and putting forward suggestions that need greater reflection and more detailed discussion. The contribution focuses on three main topics. First, the author presents some considerations on global agricultural development and trade. The author describes the different approaches to agricultural development, outcomes and effects of these approaches and evaluates which nations or which population groups are benefiting, as this could help to develop target group oriented strategies in poverty alleviation and agriculture. Second, the author takes a critical look at how agriculture and the rural sector can be an effective engine for growth. Another issue on the agenda is to determine what agriculture needs in the way of technology, infrastructure, and financial support to become a growth engine? These new insights should contribute to an appropriate formulation and implementation of tailored agriculture for development programs. Finally, the author looks at development in connection with systematic capacity building and training, pointing out the need to define sound capacity-building measures in terms of agriculture as well as to determine how these could be used more effectively.Publication Republic of India : Accelerating Agricultural Productivity Growth(Washington, DC, 2014-05-21)In the past 50 years, Indian agriculture has undergone a major transformation, from dependence on food aid to becoming a consistent net food exporter. The gradual reforms in the agricultural sector (following the broader macro-reforms of the early 1990s) spurred some unprecedented innovations and changes in the food sector driven by private investment. These impressive achievements must now be viewed in light of the policy and investment imperatives that lie ahead. Agricultural growth has improved in recent years (averaging about 3.5 percent since 2004-05), but at a long-term trend rate of growth of 3 percent, agriculture has underperformed relative to its potential. The pockets of post-reform dynamism that have emerged evidently have not reached a sufficiently large scale to influence the sector's performance. For the vast population that still derives a living directly or indirectly from agriculture, achieving "faster, more inclusive, and sustainable growth', the objectives at the heart of the Twelfth five year plan, depends critically on simultaneous efforts to improve agriculture's performance and develop new sources of employment for the disproportionately large share of the labor force still on the farm. The scope of this study is broad in the sense that it marshals considerable empirical evidence and analyses to address those issues. Yet the scope is restricted in the sense that the study does not address all of the issues. A wealth of knowledge exists (and continuing analytical work proceeds) on other major strategic issues, water and irrigation management, food grain management, and public expenditures on agriculture, for example, and the findings of this study must be seen in that context. The lack of sufficient quality data, and often the lack of access to such data, also prevents some issues from being explored in greater depth. Finally, some important issues require more focused and dedicated analysis, such as food safety and quality standards, agricultural trade, and food price increases. This relationship between longer-term strategic issues and contemporary concerns, such as water resource management and food prices, are highlighted in this study through the prism of productivity, but they too require further analysis to fully address the underlying issues.