to capture three forms of capital: human, financial and social. Specifically, we include a measure of education, wealth, and involvement in local governance. We also include age of the household head and household size. Age is expected to provide information on the willingness of the household to experiment with newer technologies and take on other types of risk; household size is meant to account for the capacity of the household to manage risks, either by diversifying income, by allocating a portion of labor resources to other income generating tasks, or by better managing production risks through labor-intensive management. The size of the household might also influence choices about technology in the face of incomplete labor markets.

The variables for the conditional demand for fertilizer, measured as fertilizer per unit of land, are standard. We include the relative price of fertilizer and the area cultivated. We also include information related to available family labor and human capital, which are expected to be complementary inputs to fertilizer. We include the livestock density as a proxy for available organic fertilizer. Soil moisture is important to the efficacy of fertilizer use and farmers have some scope for adjusting its use as the growing season progresses (Larson and Plessmann 2009). We therefore include weather outcomes measured relative to long-term averages (climate). We include wealth, which is expected to influence the households’ decision about the composition of labor activities in the household. To account for the cumulative effects of technology adoption and broad changes in the economic and policy environments, we include a time effect.<sup>19</sup> Background on fertilizer use in Ethiopia, data sources and descriptive statistics<sup>20</sup> The household data used in our analysis come from a countrywide panel household survey conducted in 2004 and 2006 by the Ethiopian Economic Association (EEA) and the World Bank. The survey consists of about 2,300 randomly selected households in 115 villages (kebeles) stratified by agro-ecological zones and regions to ensure coverage of all the agricultural production systems of the country. After adjusting for missing data, there are data on 2,140 matching households. The first round focused on extension services while the second round focused on land certification program. As a result, there are some differences in the questionnaires. Because of missing values and attrition, our sample is unbalanced and contains 4,126 observations on 2,104 households.<sup>21</sup> The survey data were supplemented with district level data on output prices from Ethiopia’s Central Statistical Authority and fertilizer prices from the Ministry of Agriculture and Rural Development, Agricultural Marketing Directorate. Data on rainfall for the survey years came from the Ethiopian Meteorological Agency.<sup>22</sup> The climate variable was constructed from average values (1960-90) of historical spatial data prepared by the Climate Research Unit (Mitchell et al. 2002). For each year of the panel, we

> 19 For a related discussion, see Feder and Umali (1993).

> 20 This section draws on Gurara and Larson (2013).

> 21 By design, the survey is meant to capture the diverse geography of Ethiopia, and may not be nationally representative of Ethiopian farmers.

> 22 Survey sites were matched with data from the closest weather station.

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