An optimization model for technology adoption of marginalized smallholders

Abstract

The rural poor are marginalized and restricted from access to markets, public services and information, mainly due to poor connections to transport and communication infrastructure. Despite these unfavorable conditions, agricultural technology investments are believed to unleash unused human and natural capital potentials and eleviate poverty through productivity growth in agriculture. Based on the concept of marginality, we develop a theoretical model which shows that these expectations for productivity growth are conditional on human and natural capital stocks and transaction costs. Policy recommendations for segment and location specific investments are provided. Theoretical findings indicate that adjusting rural infrastructure and institutions to reduce transaction costs is amore preferable investment strategy than adjusting agricultural technologies to marginalized production conditions.