The Monetary Value of Externalities
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World Bank, Washington, DC
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Understanding the value of the
externalities associated with a technology is crucial to
correctly estimate the welfare benefits of public policies
and investments. Suboptimal adoption rates of agricultural
technologies in low-income countries partly result from
farmers not fully internalizing the positive externalities
of adoption. This paper designs an experiment to measure the
monetary value of the externalities of an agricultural
pest-control technology; it elicits a farmer’s
willingness-to-pay for another farmer to adopt the
technology, as a measure of the externalities generated by
the other farmer. The findings show that externalities are
large, as mean willingness-to-pay for others is equal to two
days’ wage, or half the willingness-to-pay for themselves.
Willingness-to-pay for another farmer depends on social
proximity (as it is easier to learn about the technology
from closer connections), and the distance between their two
plots (as pest-control is more beneficial for plot
neighbors). Targeting the technology to farmers with
geographically central plots and more socially connected
farmers generates greater positive externalities and more
social value than targeting farmers with the highest
willingness-to-pay for themselves.
Palabras clave
EXTERNALITIES, TECHNOLOGY ADOPTION, AGRICULTURE, FIELD EXPERIMENTS, SOCIAL NETWORKS, WILLINGNESS TO PAY