The Determinants of Rice Variety Choice in Indonesia

This paper investigates the determinants of rice seed variety choice in Indonesia with respect to a meta-profit function. Varietal choice is modeled as depending on the profitability of high yielding varieties of seed relative to traditional varieties of seed, the schooling of cultivators and factors associated with yield uncertainty and risk aversion. Careful attention is paid to the stochastic structure of the estimated simultaneous equations switching regimes model. The maximum likehood method applied to Indonesian farm-level data is complicated by endogenous regressors and heteroskedastic errors. Adoption of high yielding varieties was found to be positively associated with its relative profitability, the likelihood of flooding, quality of irrigation conditional on its effect on relative profit, and the availability of credit, and negatively associated with land owned and the likelihood of drought. Schooling was not found to be a significant determinant of variety choice. Sources of interregional differences in cultivator behaviors in Indonesia were calculated as an application of the estimated model. Interregional differences in employment in rice cultivation but not HYV adoption were largely due to differences in wages