Diffusion of Bt Cotton in India: Impact of Seed Prices and Technological Development

Recent studies in the literature examining impact of government seed price intervention on adoption of Bt cotton get different results depending on the specifics of the situation analyzed. According to one study, reduction in seed prices enables farmers to buy seeds at lower prices and this can result in surge of area sown under Bt cotton. The other view holds that seed price interventions have little impact on the adoption rates rather these interventions may adversely affect firms’ incentives to innovate. Which of the two views characterize adoption of Bt cotton in India? Using three variations of dynamic logistic model, this paper analyzes the impact of certain economic factors like seed prices, technological development, and cotton prices on the diffusion of Bt cotton in India. It uses panel data set covering 9 major cotton growing states over the years 2002 to 2008 and finds that although seed prices were significant in impacting the diffusion rates, its impact was limited. The study also sheds light on the significance of technological development in impacting diffusion rates