Section 4. We conclude by drawing implications for a potential African Green Revolution in maize in the final section.

# **2. Markets, Risk, and Decisions about Applied Technologies**

# <u>The Role of Market Access</u>

Providing better access to agriculture input and output markets is an often stated policy goal in African countries. The underlying rationale is that input markets provide key productivity-enhancing inputs that farmers cannot produce on their own and that markets are needed to vend surpluses. As a consequence, markets are often seen as the main driver of technology adoption (Boserup 1965; Pingali, Bigot, and Binswanger 1987; Binswanger and Pingali 1989; Rosenzweig and Binswanger 1993). What’s more, recent evidence suggests that the intensification of farming systems over much of Sub-Saharan African countries has been more limited and less beneficial to farmers in comparison to tropical areas of Asia and Latin America, and several researchers point to poor access to markets or inefficient markets as root causes (Heady et al. 2013; Binswanger and Savastano 2014).

For example, Dorosh et al. (2012) find that adoption of high-productive and high-input technology declines with increases in travel time to urban center in Sub-Saharan Africa. In northwestern Ethiopia, Minten et al. (2013) find that transaction and transportation costs increased fertilizer prices at the input distribution center between 20 and 50 percent; Zerfu and Larson (2010) show that transportation time and other measures of remoteness explain the reduced use of chemical fertilizers by farmers in rural Ethiopia; and Sheahan and Barrett (2014) find a downward trend between fertilizer application levels and distance to a major market center in Ethiopia, Malawi, and Nigeria. Another set of studies show how distance from market affects the price and availability of improved seeds in Africa (Heisey et al. 1997; Shiferaw, Kebede and You 2008; Yorobe and Smale 2012; Heady et al. 2013).

A related area of research investigates the underlying causes of high transaction costs. These studies examine both observable (tangible) costs, such the costs associated with transport, handling, packaging, storage costs and spoilage, and unobservable (intangible) costs, including information asymmetries, search costs, bargaining costs and the costs of enforcing contracts (Cuevas and Graham 1986; Staal et al. 1997; Hobbs 1997; Key et al. 2000; Holloway et al. 2000; Birthal et al. 2005; Jensen 2007).

# <u>Risks and Livelihood Strategies</u>

Agricultural productivity outcomes observed in cross-country, household and farm surveys are highly heterogeneous and this implies that the choices farmers make about applied technologies are heterogeneous as well (Mundlak, Butzer and Larson 2012; Larson et al. 2014). This is partly explained by transaction costs and heterogeneous farm-gate prices, but other factors are thought to influence livelihood choices as well. In particular, the pervasive presence of uninsurable risk, poorly functioning labor and credit markets, and high transaction costs have been used to explain the diverse livelihood strategies of rural households, and choices about production technologies (e.g., Norman 1978; Morrison 1980; Feder 1985; Lipton and Lipton 1993; Rosenzweig and Binswanger 1993; Croppenstedt et al. 2003).

Without access to formal markets for risk, poor households implement ex ante risk mitigation strategies, often preferring to invest effort and resources in low-risk-low-return activities and technologies rather than in riskier but potentially more profitable alternatives (Binswanger and McIntire 1987; Rosenzweig and 3