Ex ante economic impact of Bt cowpea in Nigeria, Niger and Benin

Generating economic growth for the millions who live in poverty in developing countries is one of the key world problems of our time. In many cases, economic growth is driven by technological improvements. One of the technologies which could generate economic growth in Africa is biotechnology. However, little is known about the potential producer and consumer benefits/losses from genetically modified (GM) crops in Africa. This study uses the Choice-Based-Conjoint (CBC) protocol to estimate the ex ante economic impact of Bt cowpea (GM crop) on producers and consumers in Benin, Niger and northern Nigeria. The results from the study suggest that cowpea growers and consumers in Benin and Northern Nigeria prefer Bt to conventional cowpea because they believe that with Bt cowpea, they will be able to avoid the health hazards related to chemical insecticide misuse. More specifically, the results imply that social welfare in all of Benin, Niger and northern Nigeria would increase by at least US $542 million per year with the introduction of Bt cowpea, given the yield, income and price risks faced by economic agents in the region and given no inefficiencies in the seed sectors. Assuming inefficiencies in seed markets, social welfare in the region will increase by at least US $338 million per year. The results also suggest that, contrary to what the current literature implies, the option price does not seem to accurately reflect the ex ante Willingness-To-Pay (WTP) for a product in the face of risk and given the absence of actuarially fair insurance. The minimum price appears to be more appropriate measure and it is based on the assumption that the economic agent is more concerned about bad outcomes occurring with a substantial probability. Various methodologies were compared for estimating the ex ante economic impact of Bt cowpea. The results suggest that cheap talk combined with the CBC protocol provides more accurate estimates compared to the CBC protocol alone; they also suggest that cheap talk seems to deal with a trust rather than hypothetical bias in settings where real market transactions are characterized by imperfect information on product quality. A comparison between mathematical programming and the CBC protocol as valuation methods suggest that the latter is preferable in settings where the key variables affecting utility cannot be easily identified