Assessing Peer Effects and Subsidy Impacts in Technology Adoption: Application to Grazing Management Choices with Farm Survey Data

Rotational grazing provides potential private and social benefits. However, the average adoption rate among ranchers is just over 30 percent in the United States. Peer effects are increasingly recognized as an important driver of technology adoption. We develop a model to identify how peer networking affects ranchers’ adoption decision of grazing practices, and also the impacts of subsidies. With farm-level survey data, we apply a simultaneous-equations model to take account of endogeneity issues with peer effects that are measured as the number of adopters a rancher knows or the extent of adoption in a rancher’s neighborhood. Empirical analysis provides evidence that there are significant peer effects in the adoption of rotational grazing. This implies that incentive policies will have multiplier effects in the long run on adoption through the channel of peer networking.