An Economic Assessment of Banana Genetic Improvement and ...

98 CHAPTER 7
The direct link between infrastructure
development (Ω M ) and use of soil fertility
management practices is not clear. Improvement
in road infrastructure reduces the costs
of physical access to markets, but also enhances
market opportunities in nonagricultural
enterprises, increasing the opportunity
costs of investing in soil conservation. In the
latter case, the indirect effects on use of soil
conservation technologies might be negative
when road infrastructure improves. Increased
commercialization of banana production
may also result in more soil
depletion, which increases perception of the
soil fertility problem and hence use of soil
amendment techniques. Infrastructure development
was represented in the estimation
by distance from the center of the village to
the nearest paved road, a village-level
variable.
Economic theory predicts that better
market price for bananas will increase the
net returns from higher yields associated
with soil fertility amendment technology,
whereas higher input prices (for example,
wage rate and the endogenous price of fertilizers)
will reduce the returns and hence
the incentives to use improved management
technology. Because the banana farm-gate
price is positively correlated with wage rate,
a ratio of average farm-gate price of bananas
to village wage rate was constructed
for the estimation (P B /w).
The expenditure constraint in the estimation
is represented by the total exogenous
income received by the household as net
transfer in the form of interest from private
assets, gifts, informal credit, and remittances.
The exogenous income from household
private assets (I) was defined as cash
inflow in the form of rent from buildings or
interest from previous investments. Households
with access to this type of exogenous
income are able to overcome liquidity constraints
and can purchase farm implements
that enable them to save on labor or use the
cash to hire labor. Hence, they will be able
to use and demand more of the soil fertility
management practices.
Bilateral transfers from social networks
also constitute an exogenous income to the
household. Bilateral transfers in the form of
gifts, informal credit, and labor are part of
the major resources that rural households in
developing countries exchange. These transfers
can influence the demand for soil fertility
management practices directly when
used in implementing the practices or indirectly
by reducing the risk aversion (Fafchamps
and Lund 2003). Bilateral transfers
accruing to the household were measured
for 12 months by asking respondents whether
the household had received any cash, any
other items in the form of a gift, donations,
or free labor from people other than household
members in the past 12 months. For
items received by the household, the respondent
gave the total amount received; for
noncash items, the concept of willingness to
pay was used to attach a value to the items
so as to standardize those items across
households. Similar questions were asked
about the household expenditure on each
item in the social network for the same period.
Net transfer for each item was computed
as the difference between receipts and
expenditure within a social network.
Information diffusion parameters are
hypothesized to affect the use of practices
both directly and indirectly through perception
formation. Formal diffusion parameters
included in the estimation are the cumulative
contact with the extension educators
and exposure to the new banana varieties.
Large, discrete differences in knowledge
are hypothesized between villages that have
been exposed to new banana varieties and
related information and those that have not.
The positive role of extension educators in
adoption of agricultural technologies is well
established in the literature (Feder, Just, and
Zilberman 1985; Feder and Umali 1993).
Social capital and farmers’ experience
represented informal means of generating
or diffusing information. Experience with
the technology affects both perceptions of
soil fertility and use of soil fertility management
practices. Social capital facilitates co-