Technological innovations, downside risk, and the modernization of agriculture

We use a randomized experiment in India to show that improved technology enhances agricultural productivity by crowding in modern inputs and cultivation practices. Specifically, we show that a new rice variety that reduces downside risk by providing flood tolerance has positive effects on adoption of a more labor intensive planting method, area cultivated, fertilizer usage, and credit demand. We find that a large share of the expected gains from new technology comes from crowding in of other investments. Therefore, improved technologies that reduce risk by protecting production in bad years have the potential to increase agricultural productivity in normal years. JEL codes: O30, O13 Department of Economics, Tufts University. Department of Agricultural and Resource Economics, University of California at Berkeley. International Rice Research Institute, New Delhi India. We acknowledge financial support from the Agricultural Technology Adoption Initiative of the Bill and Melinda Gates Foundation and from the Stress-Tolerant Rice for Africa and South Asia (STRASA) project of the CGIAR. We thank Marshall Burke, Michael Carter, Kelsey Jack, Ted Miguel, Tavneet Suri, and Mushfiq Mobarak for helpful comments and suggestions. We also thank seminar audiences at UC Berkeley, University of Connecticut, Tufts University, and the 2014 BREAD workshop for useful suggestions. We are grateful to the staff at the Balasore Social Service Society for outstanding work in the field.