Replication Data for Chapter 4: Does exposure to markets promote farmers' investment behavior? - Empirical evidence from rural Ethiopia

This study investigates the effect of exposure to markets on farm households’ agricultural investment decisions. Specifically, we explore whether and how access to markets affects farmers’ adoption of risky but profitable technologies in a setting where
farmers can not directly purchase these technologies from the market. This study
provides new evidence by focusing on the demand-side, instead of the supply-side
impact of market exposure on investment decisions. We utilize survey and incentivized experimental data collected from the Tigray regional state of Ethiopia. We use
an Endogenous Switching Probit and IV-Probit models to attenuate the potential self-
selection bias. We find that market exposure induces farmers to adopt agricultural
technologies, such as chemical fertilizer, improved seeds, manure, and row planting.
We test for two potential causal mechanisms through which market exposure may
affect farmers’ agricultural investment behavior: risk-aversion and locus of control.
We find evidence that market exposure promotes investment behavior by attenuating
farmers’ risk-aversion and enhancing their internal locus of control. The findings in
this study suggest that markets promote investment behavior not only through the direct provision of modern technologies but also by shaping farmers’ personality traits
that are essential for investment behavior