Contents lists available at ScienceDirect Food Policy journal homepage: www.elsevier.com/locate/foodpol The heterogeneous effect of shocks on agricultural innovations adoption: Microeconometric evidence from rural Ethiopia Gebrelibanos Gebremariam a, ⁎ , Wondimagegn Tesfaye b a Department of Economics and Technological Change, Center for Development Research (ZEF), University of Bonn, Genscherallee 3, 53113 Bonn, Germany b United Nations University – Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), Boschstraat 24, 6211 AX, Maastricht, The Netherlands ARTICLE INFO JEL codes: O12 O13 Q12 Q16 Keywords: Shocks Agricultural innovation Technology complementarity Multivariate probit Ethiopia ABSTRACT Theoretically, the relationship between shocks and agricultural innovation adoption could be ambiguous. While shocks could lower the competence and capacity of households to adopt new agricultural innovations, house- holds can also take-up agricultural innovations as a coping mechanism against the different shocks they face. Using a nationally representative household data from Ethiopia of the Living Standards Measurement Study- Integrated Surveys on Agriculture (LSMS-ISA) of the World Bank, this paper analyzes the effect of idiosyncratic and covariate shocks on adoption of different agricultural innovations, assuming interdependence among the innovations. We find shocks to have heterogeneous effects on the adoption of agricultural innovations. Specifically, production and health shocks have negative effects on the adoption of high-cost innovations such as improved seeds, chemical fertilizer, and irrigation. However, production shocks are positively associated with low-cost innovations such as organic fertilizer. To enhance farmers’ adoption of agricultural innovations, especially high-cost innovations, there is a greater need towards the design of policies and interventions that would reduce household’s exposure to production and health shocks. 1. Introduction Smallholder agriculture plays a vital role in enhancing food se- curity, poverty reduction and sustainable development in developing countries, particularly in Sub-Saharan Africa (SSA). Despite its mo- mentous role, the performance of the sector has not lived up to ex- pectations. While Africa is expected to catch-up with the rest of the world, agricultural productivity remains low mainly due to poor land management practices and production methods (Bulte et al., 2014). African agriculture is also characterized by a pervasive yield gap and volatility in production and marketed volume that could greatly be attributed to extreme weather events, human health and market-related shocks (Tittonell and Giller, 2013). Consequently, the risks of food in- security and poverty are becoming policy and development challenges in SSA (FAO et al., 2015). Given Africa’s challenge of having to feed its rapidly growing population, increasing agricultural productivity and narrowing yield gaps is inevitable for improving food security and boosting economic growth under covariate constraints such as climate change (Dzanku et al., 2015). Technical change in agriculture is one of the feasible options to close yield gaps in low production potential re- gions where high pressure on land, low soil fertility and low productivity are ubiquitous (Dzanku et al., 2015). Technical change through increased adoption of agricultural in- novations is an essential criterion to increase agricultural productivity, enhance food security, ensure inclusive growth and reduce poverty (Teklewold et al., 2013b; Ndiritu et al., 2014; Sheahan and Barrett, 2017). Despite their widely cited benefits and excessive efforts exerted to encourage farmers to invest in agricultural innovations (Teklewold et al., 2013b), the adoption rates are still low in rural areas of devel- oping countries (Somda et al., 2002; Jansen et al., 2006; Kassie et al., 2009; Wollni et al., 2010; Khonje et al., 2015). This is particularly true for Ethiopia where adoption of many agricultural innovations is still low and food insecurity and poverty continue to be major constraints to productivity growth and sustainable human development (Teklewold et al., 2013a,b). The low adoption rate could be attributed to various factors including individual farmers’ characteristics, poor infra- structure, market imperfection, weak institutional support and price risks (Sadoulet and Janvry, 1995; Kassie et al., 2013; Shiferaw et al., 2014). The adoption of agricultural innovations and their determinants is well established in the literature. However, most of the previous studies focus on adoption of single agricultural technology (e.g. Baidu-Forson, https://doi.org/10.1016/j.foodpol.2017.12.010 Received 14 April 2016; Received in revised form 26 March 2017; Accepted 28 December 2017 ⁎ Corresponding author. E-mail addresses: g.gebremedhin@gmail.com, ggebrema@uni-bonn.de (G. Gebremariam), tesfaye@merit.unu.edu (W. Tesfaye). Food Policy 74 (2018) 154–161 0306-9192/ © 2018 Elsevier Ltd. All rights reserved. T