BEHAVIORAL ECONOMICS IN AGRICULTURE
Small behaviorial nudges can better the lives of farmers and spur economic growth by enhancing agricultural
productivity, market accessibility, and better savings mechanisms
Busara uses behavioral interventions that have proven to be successful in the agriculture sector to develop a wide range of innovative strategies for clients, including:
• Increasing take-up of technology or inputs like fertilizer and high-yield seed to enhance productivity
• Promoting sustainable agricultural practices for higher crop yields
• Adding value to raw production through capacity building and better marketing
• Providing low-cost alternatives to costly subsidies
WHY AGRICULTURE MATTERS TO US
Improving productivity in the agricultural sector is vital for sustaining economic growth in most of the world’s major developing economies. Rural development and solving low productivity bottlenecks are therefore key facets of poverty reduction and economic development. However, adoption of best practices for increasing household income and farm productivity is often slow due to unsolved gaps in human behavior and decision-making.
Busara fills these gaps by offering a large knowledge base of behavioral interventions that can overcome barriers in agricultural practice, as well as experimental, evidence-based solutions to problems in the sector. Behavioral interventions are often the most cost-effective solutions to increase input uptake, solve farmers’ financing issues, and encourage sound agricultural practices. Our team has expertise in diagnosing and designing better programs and policies by targeting aspects of human behavior.
HOW BEHAVIORAL ECONOMICS CAN HELP
Organizations and governments around the world have benefited from the power of behavioral interventions in advancing rural development.
PROCRASTINATION AND EASE OF ACCESS: FERTILIZER UPTAKE IN KENYA
In a study in Kenya, 97% of farmers said that they intended to use fertilizer on their fields the following season. However, only 37% actually followed through. Researchers found that going to the market was difficult for farmers both in terms of time and money. Offering home delivery for the next season right after harvest was equivalent to a 10% discount on the market price of fertilizer, but it increased fertilizer use by 70%. This effect was equivalent to implementing a 50% subsidy.
SELF-CONTROL AND COMMITMENT DEVICES: SAVINGS FOR INPUTS IN MALAWI
One study in Malawi found that when farmers are rich with cash from harvest, they no longer want to spend money on fertilizer. By the time planting season arrives, harvest income has already been spent. However, offering farmers “commitment savings accounts” where they could lock up their money until a time of their choosing had a large positive impact on well-being. With this option, farmers saved more of their harvest income for spending during the lean season. They also spent 48% more on inputs during pre-planting season and had higher total crop sales. The commitment savings intervention increased farmers’ wellbeing in multiple dimensions.
ATTENTION: MAXIMIZING PRODUCTION FOR SEAWEED FARMING IN INDONESIA
Limited attention can slow down or prevent technology adoption. A study in Indonesia found that pod size is important to maximizing production and income in seaweed farming in Indonesia. However, seaweed farmers do not think pod size is important and pay little attention to it; they do not learn that it matters over time. This finding has important implications for technology adoption and agricultural extension – simply having access to the data did not induce learning among the farmers. They only changed their behavior when presented with summaries that highlighted the overlooked dimensions.
FLAWED MENTAL MODELS: FERTILIZER OVERUSE IN INDIA
Farmers are used to estimating the likely yield of a crop by looking at how much green leafy growth it has (i.e. “green = leafy” is their mental model). While this is a good rule of thumb for crops like spinach, it is not so for grains where leafy growth actually can detract from yield. However, this flawed mental model can lead to farmers using too much nitrogenous fertilizer to increase the leafiness of the crop.
Contact us to learn more about Busara’s work in agriculture.