Market incentives for technology adoption: Experimental evidence from Kenyan maize farmers

When aspects of quality are unobservable in the market, returns to quality will be low and producers will lack incentives to invest in quality. In the case of food safety, this can have significant implications for health, as with the example of aflatoxin, a toxin produced by a fungus commonly found on maize and groundnut. We show that Kenyan farmers who produce maize for sale are less likely to undertake postharvest practices that increase the unobservable quality of aflatoxin safety, as compared to farmers who produce maize only for their own family’s consumption. Employing randomized discount vouchers, we find that willingness to pay for a new post-harvest technology to prevent aflatoxin contamination in maize is significantly lower among market producers than subsistence farmers. However, we find that take-up of the technology among market producers is increased by an opportunity to sell aflatoxin-safe maize at a premium a few months after harvest. This suggests that testing-based market incentives could address the underinvestment in unobservable quality in agriculture. However, widespread testing, if not accompanied by technologies to significantly reduce aflatoxin prevalence, could result in increased consumption of aflatoxin-contaminated maize by the poorest members of society