Adoption of New Irrigation Technology Under Production Risk

This paper investigates the factors affecting adoption of new irrigation technologies and also addresses the linkage between this type of technology and production risk. The risk-premium associated with the use of water is estimated by adapting a moment-based approach. Farm-level data were collected from a sample of 187 wheat farms, located in the three major districts of Fars province of Iran during the years 2002 and 2003. Results of this study demonstrate that the risk premium decrease with new irrigation technology. Also, it is concluded that the farmer-specific relative risk premium has positive and significant effect on the decision to adopt the new irrigation technologies. So, farmers that are more risk-averse with respect to their use of water are more likely to adopt new irrigation technologies that allow them to save water and decrease their production (yield) risk.