Farmers' green technology adoption: Implications from government subsidies and information sharing

Abstract

Abstract While the previous literature on green technology adoption has not fully considered information sharing, we consider the impact of demand information sharing on the adoption of green technologies by risk‐averse farmers in a vertical agricultural supply chain. We find that government subsidies and information sharing do not always promote farmers' adoption of green technologies. The accuracy of the information plays a vital role in promoting farmers' adoption of green technologies; however, the increased green technology adoption induced by more accurate information may be detrimental to farmer welfare in the presence of production diseconomies. Information sharing can reduce the amount of government subsidies for promoting green technology adoption, thereby suggesting the substitutable role of information and monetary instruments. Nonetheless, information‐sharing may lead to lower water savings and thus should be adopted with caution. Risk aversion has a nontrivial impact on agricultural technology adoption: farmers are more likely to adopt traditional agricultural technologies when their risk aversion is either very low or very high. Finally, we validate our decision model with U.S. Department of Agriculture cotton production data and propose management insights to help farmers make appropriate adoption decisions under information asymmetry and risk‐averse attitudes.