Nick Bloom, Labor Topics 247, 2014

LABOR TOPICS

Nick Bloom

Learning

Nick Bloom, Labor Topics 247, 2014

Technologies – like pineapples - are not used by everyone. Question is why?

Suri (2011, Econometrica)

Nick Bloom, Labor Topics 247, 2014

Conley and Udry (2008) is based around a learning story, with some key points

• Learning appears to happen slowly over time – pineapple does not immediately spread to every farmer in every village

• Information spreads best through friends and close contacts, suggesting people do not trust all information equally

• Spread also depends on success of trusted contacts, suggesting process of discovery – not everything known at t=0

Nick Bloom, Labor Topics 247, 2014

The original classic – Griliches (1957) – also focused on learning and discovery

Nick Bloom, Labor Topics 247, 2014

• Hybrid seen corn is a way of developing appropriate corn for different growing conditions – breeding is done for each area

• A single impactful technology that spread slowly across the US

• So Griliches splits adoption delays into– The “acceptance” problem (the lag in uptake by farmers) which is learning within markets

– The “availability” problem (breeding appropriateseed corn by market) which is discovery acrossmarkets, driven by profits

The original classic – Griliches (1957) shows gradual learning about hybrid seed corn

Nick Bloom, Labor Topics 247, 2014

Duflo, Kremer and Robinson (2011, AER) suggest other non-learning stories• Experiment on fertilizer use in Kenya where returns to fertilizer is about 50% to 100% per year – so a highly profitable investment

• Despite this farmers do not take up fertilizer, and this is despite being a well known effective technology (i.e. not learning issues)

• They have a model around hyperbolic discounting, and show in experiments with pre-commitment get large (profitable) uptake

– Discount at harvest (rather than planting) time increases adoption by 17%, equivalent to a 50% subsidy

• Interestingly, these are not persistent – it appears to be a commitment issue rather than a learning story

Nick Bloom, Labor Topics 247, 2014

Suri (2011, Econometrica) suggests a heterogeneity interpretation instead• Looks at hybrid maize adoption in Kenya over 1996-2004

• Stable rates of adoption and 30% of households switch (upside of using panel data, which Besley and Case 1993 also push)

• Find heterogeneity in costs and returns explains apparent adoption paradox, in particular three groups of households:

– Small group very high returns, but blocked by distance to seed/fertilizer distributors– Larger group of adopters with high returns– Larger group of switchers that have about zero returns