Portrait of Dr Adelina Gschwandtner

Dr Adelina Gschwandtner

Lecturer in Economics
Director of Studies, Stage 1

About

Adelina Gschwandtner was born in BucharestRomania. After a first degree in Economics at the Bucharest University of Economic Studies, she moved to the University of Vienna, where she was awarded her PhD in 2002.  She subsequently worked at the University of Vienna until 2011, before moving to the Vienna University of Economics and Business (WU). She joined the University of Kent in September 2012.

Adelina's research interests lie in the field of empirical Industrial Organization. Her two main research areas are Profit Persistence and Sunk Costs. She has analysed the pattern and the determinants of profit persistence in the US and the UK over the last 50 years. More recently she has worked on the determinants of profit persistence in the European food sector, and plans to analyse the relationship between food and health. Her papers in this area have been published in Economic InquiryApplied EconomicsInternational Journal of Economics and Business and The Manchester School.

Together with Val Lambson, she has analysed the impact of sunk costs on firm value and industry size. In their most recent paper they analyse the impact of depreciation as a proxy for sunk costs both from an empirical and a theoretical point of view. This paper has been awarded the Top Journal Publication prize of the WU, and was published in The Review of Economics and Statistics.

In the course of ongoing research she works at the interface between Industrial Organization and Finance. More specifically, she attempts to analyse the impact of economic fundamentals like profits and profit persistence on stock returns. This project is funded by the Austrian Science Fund (FWF) and was awarded the Theodor Koerner Prize of the Austrian Chamber of Labour.

Most recently, Adelina is performing research on organic food and the economics of happiness.

She is a member of the Microeconomics Research Group.

Research interests

Adelina's main research interests are in applied economics and empirical industrial organization. This includes work on profit persistence in the manufacturing and food sector and the relationship between economic and financial markets. It also includes work on sunk costs and their impact on firm size and industry dynamics. More recently, Adelina has been analysing the consumer choice of organic food products and the relationship between nutrition and other lifestyle dimensions on happiness in the UK.

Adelina's RePEc page is http://econpapers.repec.org/RAS/pgs2.htm

Media coverage

https://www.kent.ac.uk/news/society/15861/taste-and-health-benefits-key-reasons-for-buying-organic-food

http://www.inquirelive.co.uk/news/ukc-study-shows-consumers-buy-organic-produce-taste-not-ethics/

http://www.organicauthority.com/study-shows-consumers-buy-organic-food-for-taste-and-health-reasons-not-ethics/

http://www.organic-business.com/imag/onbwinter17/

Teaching

Supervision

Adelina is interested in supervising PhD research on the following topics:

  • Empirical industrial organisation
  • Consumer valuation studies

Current students

Past students

  • Christian Crentsil, completed 2018
  • Cheul Jang, completed 2018

Professional

Administrative roles

  • Director of Studies, Stage 1
  • Value Programme Co-ordinator

Publications

Article

  • Gschwandtner, A. and Burton, M. (2020). Comparing treatments to reduce Hypothetical Bias in Choice Experiments regarding Organic Food. European Review of Agricultural Economics [Online]. Available at: http://dx.doi.org/10.1093/erae/jbz047.
    There has been almost no recent formal economic analysis of the WTP of British consumers for organic products. Given the rising demand for organic products on one hand and the decline in the organically farmed area in the UK on the other hand, this is an important topic to address. The present paper analyses the demand for organic products using both stated and revealed preferences from exactly the same consumers. The stated preference model is based on the respondent's choice from hypothetical choice sets. Attributes in the stated preference model are based on the ranges of the actual levels of attributes found in shops and are presented to respondents using a fractional factorial statistical design. Three different hypothetical bias treatments are applied in order to reduce hypothetical bias. The stated preference results are validated with the help of actual consumption data from the weekly shopping of the same consumers. The results show that there exists a core of organic consumers of about 20-30% of the sample that have a positive willingness to pay for the organic label. However, consumers seem to be willing to pay more for other attributes such as a higher quality, environmentally friendly production and no chemical usage. Attributes such as animal welfare, and a longer expiry date do not seem to have the same relevance for the UK consumers.
  • Gschwandtner, A. (2018). The Organic Food Premium: A Local Assessment in the UK. International Journal of the Economics of Business [Online]. Available at: https://doi.org/10.1080/13571516.2017.1389842.
    The present study combines stated and revealed preferences in order to estimate the hypothetical bias of a sample of organic food consumers from Canterbury in the UK. It uses contingent valuation and hedonic pricing to compare stated and revealed preferences and employs the Almost Ideal Demand System to estimate the elasticity of organic products. The results show that the average price premium is fairly large (approximately 10%). They also demonstrate, crucially, that the size of this estimate is encouragingly similar whether a willingness-to-pay or hedonic pricing method is used. The estimated elasticity of organic products is on average above one, suggesting an elastic response to pricing policy in the present sample. Desirable next steps and potential policy applications for future research are also discussed.
  • Gschwandtner, A. and Hirsch, S. (2017). What drives firm profitability? A comparison of the US and EU food processing industry. The Manchester School [Online] 86:390-416. Available at: http://dx.doi.org/10.1111/manc.12201.
    This paper analyzes persistence and the drivers of profitability in US and EU food processing using GMM estimations. Due to different firm size structures first comparable samples of US and EU food processors are derived using Propensity Score Matching. The GMM results indicate that profit persistence in food processing is lower than in other manufacturing sectors. Firm-specific drivers of profitability are size and financial risk. Regarding industry characteristics concentration and the growth rate significantly influence profitability. The findings provide insights for the management of US and EU food processing firms aiming to enhance their competitiveness.
  • Gschwandtner, A. and Hauser, M. (2016). Profit Persistence and Stock Returns. Applied Economics [Online] 48:3538-3549. Available at: http://dx.doi.org/10.1080/00036846.2016.1142652.
    This paper attempts to assemble further empirical evidence on the relationship between the product and the financial market. Drawing back on work in industrial organization, we analyse the relationship between profit persistence and factor adjusted stock returns looking at about 2000 listed US firms over the last 34 years. While the relationship between (current, lagged and unexpected) profits/earnings and returns has been extensively analysed before, to our knowledge this is the first study to look at the relationship between stock returns and profit persistence. We interpret profit persistence as a result of market competition and innovation of the firm. It is shown that firm specific long-run profit persistence after correction for other additional economic fundamentals of the firm have a positive impact on 4-factor adjusted returns and a negative impact on their volatility.
  • Hirsch, S., Schiefer, J., Gschwandtner, A. and Hartmann, M. (2014). The determinants of firm profitability differences in EU food processing. Journal of Agricultural Economics [Online] 65:703-721. Available at: http://dx.doi.org/10.1111/1477-9552.12061.
    This paper decomposes the variance in food industry return-on-assets into year, country, industry, and firm effects. Besides these main effects, we include several interactions and discuss their theoretical foundations. After determining effect significance in a nested ANOVA with a rotating pattern of effect introduction, we estimate effect magnitude using components of variance in a large sample of corporations. The results show that firm characteristics are more important than industry structure in determining food industry profitability in Europe. Main effects and interactions of year and country membership are weak, indicating that performance differentials can poorly be explained by macroeconomic and trade theory.
  • Hirsch, S. and Gschwandtner, A. (2013). Profit Persistence in the European Food Industry: evidence from five European countries. European Review of Agricultural Economics [Online] 40:741-759. Available at: https://doi-org.chain.kent.ac.uk/10.1093/erae/jbt007.
    The present article is the first that analyses profit persistence in the European food industry. Based on the Arellano and Bond GMM estimator, the degree of profit persistence and the drivers of persistence are quantified for a large sample of food processing firms. The analysis reveals that the degree of profit persistence in the food industry is lower compared with other manufacturing sectors due to strong competition among food processors and high retailer concentration. Furthermore, firm size is an important driver of persistence, while firm age, risk and R&D intensity have a negative influence
  • Gschwandtner, A. and Crespo-Cuaresma, J. (2013). Explaining the persistence of profits: A time-varying approach. International Journal of the Economics of Business 20:125-140.
  • Gschwandtner, A. and Lambson, V. (2012). Sunk Costs, Depreciation, and Industry Dynamics. Review of Economics and Statistics [Online] 94:1059-1065. Available at: http://dx.doi.org/10.1162/REST_a_00236.
    Two of the most robust results from dynamic competitive models of industrial organization suggest that higher-sunk-cost industries should exhibit higher intertemporal variability in the market value of their firms and lower intertemporal variability in the size of their industries. These predictions have done well empirically. This paper argues on theoretical and empirical grounds that depreciation generates countervailing effects.
  • Gschwandtner, A. (2012). Evolution of Profit Persistence in the USA: Evidence from Three Periods. Manchester School [Online] 80:172-209. Available at: http://dx.doi.org/10.1111/j.1467-9957.2011.02277.x.
    In the present study we analyze and compare profit persistence during the periods 1950–66, 1967–83 and 1984–99 in the USA. While most of the previous studies performed persistence analysis on survivors only, the present set-up allows for companies to enter and exit the analyzed sample, giving a more comprehensive depiction of the US economy during this half of the century. The results point towards a constant increase of competition after the opening of the US economy to international competition in the 1960–80s. Key determinants of profit persistence seem to be the firm's and industry size, industry growth, and more recently risk, advertising and exports.
  • Cable, J. and Gschwandtner, A. (2008). On Modelling the Persistence of Profits in the Long Run: A Test of the Standard Model for 156 US Companies, 1950–99. International Journal of the Economics of Business [Online] 15:245-263. Available at: http://dx.doi.org/10.1080/13571510802134411.
    ‘Persistence of profits’ studies of competitiveness across samples of firms, and for individual firms, have almost always employed a simple first order autoregression model. Reservations over the use and interpretation of the AR1 in this context raise questions both over the reliability of previous results, and for future research strategy. We test the standard model on a common sample of 156 US companies over a 50 year period against a recently proposed, alternative model that adopts structural time series methods. A statistically significant degree of consistency is found between the two approaches in identifying firms persistently above or below the competitive norm in the long run. However, the structural time series method detects a much higher overall incidence of persistence, and appears to offer advantages in cases where the profit dynamics are more complex.
  • Cuaresma, J. and Gschwandtner, A. (2008). Tracing the Dynamics of Competition: Evidence from Company Profits. Economic Inquiry [Online] 46:208-213. Available at: http://dx.doi.org/10.1111/j.1465-7295.2007.00062.x.
    This article proposes a simple approach to analyzing profit dynamics, which allows for time-varying persistence of profits. The time series model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive process. Using the longest time series available on profits for more than a hundred U.S. firms, we find that there is ample evidence of time variation in the persistence parameter. (JEL L00, C22)
  • Gschwandtner, A. and Hauser, M. (2008). Modelling Profit Series: Nonstationarity and long Memory. Applied Economics 40:1475-1482.
  • Gschwandtner, A. and Lambson, V. (2006). Sunk Costs, Profit Volatility, and Turnover. Economic Inquiry 44:367-373.
  • Crespo-Cuaresma, J. and Gschwandtner, A. (2006). The competitive environment hypothesis revisited: Nonlinearity, nonstationarity and profit persistence. Applied Economics 38:465-472.
  • Gschwandtner, A. (2005). Profit Persistence in the "Very" Long Run: Evidence from Survivors and Exiters. Applied Economics 37:793-806.
  • Gschwandtner, A. (2004). Comparing two different trade policy tools. Romania joining the European Union: The fight with time 1:499-507.
  • Gschwandtner, A. and Lambson, V. (2002). The Effects of Sunk Costs on Entry and Exit: Evidence from 36 Countries. Economics Letters 77:109-115.

Monograph

  • Gschwandtner, A., Ribeiro, E. and Cesar, R. (2019). Estimation of a Hedonic Price Equation With Instruments for Chicken Meat in the UK: Does the Organic Attribute Matter?. Kent Discussion Papers in Economics.
    Chicken meat consumption has increased substantially in the last decades due to farming and processing intensification and due to perceived health and environmental benefits for consumers. Organic chicken additionally, is perceived to have better taste, lead to higher animal welfare and additional benefits for the environment. Thus understanding consumers’ preferences for organic chicken is central for policy-making and market strategies that can shape this market in the future. This paper uses a comprehensive data set of scanned shopping's from UK consumers, to show that they are willing to pay an average premium of 135% for the organic attribute in the case of chicken. In addition, this paper contributes to the literature of environmental valuation, demonstrating that household characteristics can be used as instruments into a GMM approach to a hedonic price model, to address the endogeneity issues usually ignored in this literature.
  • Crentsil, C., Gschwandtner, A. and Wahhaj, Z. (2018). The Effects of Risk and Ambiguity Aversion on Technology Adoption: Evidence from Aquaculture in Ghana. School of Economics.
    We study how aversion to risk and ambiguity affects the adoption of new technologies by Ghanaian smallholder aquafarmers. We conduct a set of field experiments designed to elicit farmers’ risk and ambiguity preferences and combine it with surveybased information on their technology adoption decisions. We find that aquafarmers who are more risk-averse were quicker to adopt the new technologies: a fast-growing breed of tilapia fish, extruded feed and floating cages. By contrast, ambiguity aversion has no effect on the adoption of the new tilapia breed and extruded feed. Furthermore, it slows down the adoption of floating cages - a technology which entails higher fixed costs than the others - and the effect is diminishing in the number of other adopters in the village. We argue that these differential effects are due to the fact that the technologies are risk-reducing, with potential ambiguity about their payoff distributions at the early stages of adoption. The findings highlight the importance of distinguishing between risk and ambiguity in investigating technology adoption decisions of small-holder farmers in developing countries
  • Gschwandtner, A. and McManus, R. (2018). University Vice-Chancellor Pay, Performance and (asymmetric) Benchmarking. Adelina Gschwandtner. Available at: https://www.kent.ac.uk/economics/research/papers/2018/1807.html.
    We study the pay of UK universities chief executives (‘vice-chancellors’) over a ten year period. Although there is a correlation between pay and performance, exploratory analysis doesn’t ?nd statistically signi?cant evidence that a change in performance leads to a change in pay, or vice-versa, which motivates us to look at other explanations. Instead, we ?nd strong support for an asymmetric or aspirational benchmarking to average behaviour, where those institutions with below average pay increase their vice-chancellor’s salaries quicker than those with above average pay, independent of performance. We simulate a model whereby di?erent institutions target di?erent places of the distribution of salaries and demonstrate that in?ation of pay can be explained by this behaviour.
  • Gschwandtner, A., Jang, C. and McManus, R. (2017). Improving Drinking Water Quality in South Korea:A Choice Experiment With Control for Hypothetical Bias. University of Kent. Available at: https://www.kent.ac.uk/economics/research/papers/2017/1720.html.
    Increased pollution leads to a constant decrease of drinking water quality worldwide. Due to safety concerns, unpleasant taste and odour only about 3% of the population in South Korea is drinking untreated tap water. The present study uses choice experiments and cost-benefit analysis to investigate the feasibility of installing two advanced water treatments in Cheongju waterworks in South Korea. The waterworks is situated in the middle of the country and is providing more than half a million people with drinking water. The study uses latent class attribute non-attendance models in a choice experiment setting in order to estimate the benefits of the two water treatments. Moreover, it uses various methods to correct for potential hypothetical bias. This is important as hypothetical bias impedes the reliability of survey results. The lower bound of the median WTP for installing a new advanced water treatment system is about $2 US/month, which is similar to the average expenditures for bottled water per household in South Korea. These lower bounds were found using bootstrapping and simulations. Scenarios under which the instalment of the advanced water treatments is feasible are discussed together with environmental solutions in the long-run.
  • Gschwandtner, A., Jewell, S. and Kambhampati, U. (2016). On the Relationship Between Lifestyle and Happiness in the UK: Discussion Paper 16/13. University of Kent. Available at: https://www.kent.ac.uk/economics/documents/research/papers/2016/1613.pdf.
    In the present paper we attempt to analyse the relationship between ‘lifestyle’ and happiness in the UK using fixed effects and granger causality tests to test for endogeneity. We split the analysis by gender and find different effects between women and men. While men seem to be more physically active and this active lifestyle impacts stronger on their wellbeing than on the one of women, women seem to be more conscientious with respect to nutrition and nutrition impacts stronger on the wellbeing of women than on the wellbeing of men. In general lifestyle variables have a significantly positive impact on happiness and the impact remains significant with the use of fixed effects for both genders. This suggests that a ‘healthy lifestyle’ has a positive impact on happiness and that any policy improving our lifestyle proxies would also make people happier in the UK.
  • Gschwandtner, A. and Hirsch, S. (2016). What Drives Firm Profitability? A Comparison of the US and EU Food Processing Industry: Discussion Paper 16/12. University of Kent. Available at: https://www.kent.ac.uk/economics/documents/research/papers/2016/1612.pdf.
    This article analyzes persistence and the drivers of profitability in US and EU food processing using GMM estimations. Due to different firm size structures first comparable samples of US and EU food processors are derived using Propensity Score Matching. The GMM results indicate that profit persistence in food processing is lower than in other manufacturing sectors. Firm-specific drivers of profitability are size, growth and financial risk. Regarding industry characteristics the growth rate significantly influences profitability. The findings provide insights for the management of food processing firms as well as for policy decisions aiming to counter power imbalances in the food sector.
  • Gschwandtner, A. (2014). The Organic Food Premium:A Canterbury Tale: Discussion Paper No 14/11. School of Economics, University of Kent.
    The present paper attempts to bring further evidence on the behavioural gap for organic food in Britain. The stated preferences are analysed by contingent valuation, while the revealed preferences are estimated by hedonic pricing. A small but significant gap in the premium for organic food between stated and revealed preferences has been found. This gap may suggest a need for price premium intervention. The estimated price elasticity for organic products is on average above one in absolute value suggesting that a pricing policy could be very effective.
  • Gschwandtner, A. (2014). The Behavioural Gap for Organic Food in the UK: A Choice Experiment. Department of Economics, University of Kent at Canterbury.
  • Gschwandtner, A. and Hauser, M. (2013). Profit Persistence and Stock Returns: Discussion Paper No. 13/20. School of Economics, University of Kent. Available at: https://www.kent.ac.uk/economics/research/papers/2013/1320.html.
    This paper attempts to assemble evidence for the relationship between the product and the financial market. Drawing back on work in industrial organization, we analyze the relationship between profit persistence and expected stock returns. We show that long-run profit persistence together with other additional economic firm fundamentals have a significant impact on stock returns and on their volatility even after adjusting for risk. At the same time we bring evidence for a 'low volatility anomaly'.

Thesis

  • JANG, C. (2018). Evaluating the Feasibility of an Investment for Improving Drinking Water Quality in South Korea.
    This dissertation aims to test the feasibility of improving the quality of drinking water in a target area in South Korea. The problem with drinking water quality is caused by pollution of the water environment. Most waterworks in South Korea are unable to handle problems like an unpleasant taste or odour in tap water. Improving raw water quality through prevention of water pollution is explored in pursuit of a long-term solution. However, this research focuses on advanced water treatment systems for a short-term solution and mainly tests the extent to which an investment in one chosen waterworks is feasible. Cost-benefit analysis (CBA) is used to test the feasibility of two advanced water treatment systems: granular activated carbon (GAC), and ozone plus GAC treatment. Three main steps are involved: measurement of the social benefits, cost estimation of the two alternatives and the CBA.
    Choice experiments are chosen for measuring the benefits with three alternatives: the status quo, GAC, and ozone plus GAC. Four key attributes are selected: safety, taste and odour, colour and cost. The experimental design consists of 32 choice cards. Three types of treatment for hypothetical bias are used: budget constraint reminder, cheap talk and an honest priming task. In July/August 2015, 573 people participate in the survey; ineffective data, potential label heuristics, and outliers are filtered. Thus, 406 data items are examined for representativeness of the sample regarding socioeconomic factors and used in the analysis.
    The marginal willingness to pays (MWTPs) is estimated using three types of logit models (multinomial logit, random parameter logit and latent class logit). To detect the effectiveness of the treatments for mitigating hypothetical bias, dummies and interaction terms are included in the models and the coefficients of the variables are examined. After measuring the social benefits using MWTP, the cost of installing the two alternatives is estimated. While the mean MWTP is the correct measure to use from the standpoint of economic efficiency, the median WTP is probably the more appropriate measure to assist a democratic decision-making
    ii
    process and can be considered a more cautious value to avoid hypothetical bias. Thus, the median values of WTP are also used for the CBA.
    The economic feasibility is tested by comparing the costs and benefits of the two alternatives. Both net present values (KRW1 15.8 billion for GAC and 13.1 for ozone plus GAC) are larger than zero. Internal rates of return of the two alternatives are 8.97% for GAC and 7.46% for ozone plus GAC. The benefit to cost ratio of GAC, 1.389, is greater than of ozone plus GAC, 1.225. Note that the GAC seems to be a more robust option than ozone plus GAC in terms of the decision rules of three discount cash flow methods.
    Concerning risk and uncertainty, sensitivity analyses are performed using several scenarios with the following factors: increase of discount rate, costs and construction period, and decrease of business life, benefits and beneficiaries. The worst case scenarios would likely be when the social benefits decrease to zero within the business life. In such a case, the three feasibility values cannot sustain the validity of the two alternatives.
    In conclusion, the results of this research suggest that investment in the two advanced water treatment systems is feasible, but it depends on situations that may change in practice, such as reduction in the business life. The research also shows that prevention of water pollution can and should be a complementary approach for supplying safer and cleaner drinking tap water. Protecting the water catchment area along with the installation of the two advanced water treatment options should be considered for a more comprehensive and sustainable solution in the long run.
  • Crentsil, C. (2018). Essays On The Effects of Risk and Ambiguity Attitudes On Production Choices Of Smallholder Fish Farmers In Southern Ghana.
    This thesis contains four empirical chapters which together contribute to behavioural economics in the area of fish production in a developing country context. The key thread connecting all the empirical studies is the behavioural characteristic of farmers (risk and ambiguity attitudes) elicited through incentivised field experiments and general survey questions.
    The first empirical chapter seeks to answer the questions: What is the risk attitude of a typical smallholder fish farmer in a developing country? Do risk attitudes of fish farmers remain stable across different elicitation methods and contexts of validation? Risk attitude measures are known to be sensitive to the method of elicitation and context (Bauermeister and Mushoff, 2016). The purpose of this chapter is three-fold.
    1. It elicits and compares the risk attitudes of within-subject sample of smallholder fish farmers in southern Ghana using three of the frontier methods used to elicit risk attitudes in the literature. The risk attitudes elicited from these methods are employed in the subsequent chapters of this thesis to investigate how risk preferences affect production efficiency and technology adoption.
    2. It investigates how the risk attitude measures correlate with each other, and how they vary with farmer characteristics.
    3. It assesses whether the risk attitude measures can predict farmer responses to questions on hypothetical economic choices.
    The results show that a typical smallholder fish farmer is risk preferring in the gains-only lottery experiment, risk averse in the gains-and-losses lottery experiment but is risk neutral from the self-reported risk attitude scale. However, the risk attitude measures from the two lottery experiments are positively correlated, consistent with the assumption that the two experiments capture similar traits of the same farmer. This confirms that risk attitude measures are influenced by the method of elicitation and the context being examined. Some personal characteristics of the farmers influence their risk attitudes. Finally, while risk preferences from the lottery experiments failed to explain hypothetical economic choices, the stated risk preferences were significantly correlated with some hypothetical economic choices, perhaps due to hypothetical bias. These results indicate that care should be taken to tailor the elicitation of risk attitudes to contexts and domains farmers are familiar with.
    The second empirical analysis attempts to answer the question: to what extent does a fish farmer's risk attitude affect his/her level of economic efficiency? This is predicated on the assumption that the types, levels and frequency of application of inputs could be influenced by the risk attitudes of farmers. Data on the units of inputs, outputs and prices are collated from the farmers in an earlier survey, and their risk attitudes obtained from the previous chapter are then juxtaposed on their production data. The economic efficiency of the farmers is assessed with both the Stochastic Frontier Analysis (SFA) and the Corrected Ordinary Least Squares (COLS) techniques. While the former assumes that all deviations from the cost frontier are due to farmer-specific factors (including risk attitudes) and stochastic factors, the latter, a deterministic procedure, attributes all deviations from the frontier to farmer-specific factors. The evidence from this chapter suggests that over 80% of the total deviation from the cost frontier results from stochastic factors beyond the control of the farmers. It is also found that risk attitudes play no significant role in the economic efficiency of fish production in the study area. Based on the findings, it is concluded that stochastic factors, such as government policies, may have a greater impact on economic efficiency rather than risk attitudes of farmers.
    The third empirical study assesses how risk attitudes of fish farmers affect the speed of technology adoption; adoption decisions are modelled with duration models. This study focuses on the adoption of Floating Cages, Extruded Feed and Akosombo Strain of Tilapia (AST) technologies in the fish farming sector in southern Ghana. Contrary to most existing literature on speed of adoption of technologies (e.g. Liu, 2013), the results from this chapter show that risk averse farmers have a higher proclivity to adopt the AST, Extruded Feed and Floating Cage technologies at a point in time. This novel outcome is due to the nature of the technologies in question, as perceived by the farmers. Liu's (2013) study, for instance, focuses on the adoption of cotton seeds modified genetically with Bacillus thuringiensis (Bt) bacteria, which enables cotton plants to produce phytotoxins to kill pests. The subjective risks posed by these phytotoxins to the farmers themselves may be an additional source of uncertainty and a likely reason for the delayed adoption by risk averse farmers. However, in this chapter, even though the AST is also genetically modified, it produces no toxins and yet it is more disease-resistant than the local breeds, therefore it may be perceived by the farmers as risk-reducing and hence it may not be surprising that risk averse farmers adopt this technology earlier.
    In the final empirical study, attention is on how ambiguity attitudes affect the farming decisions of smallholder fish farmers, using the speed of adopting the AST technology as an example of such decisions. The speed of technology adoption is analysed with the hazard/survival model. Additionally, this chapter introduces and interacts the number of previous adopters in the same village with ambiguity attitude as a better test of the effect of ambiguity aversion on farmers' decisions. Where a farmer cannot predict with certainty the yield to be obtained from the new technology, an ambiguity averse farmer is expected to adopt the technology late. Ambiguity attitudes are elicited with Ellsberg's (1961) two-colour urn experiment. The results from this chapter show that the average fish farmer is ambiguity averse. However, risk aversion, but not ambiguity aversion, has a significant effect on the speed of adopting the AST technology in the study area, confirming the robustness of the finding in the previous chapter. I also find that the speed of adopting this technology increases with the number of prior adopters in the same village. The lack of any significant impact of ambiguity attitudes in determining the speed of adopting this technology suggests that there are other important determinants of adopting this technology, rather than lack of information about it, that affect other technology adoption decisions.
    Overall, this thesis demonstrates and presents the elicitation of risk and ambiguity preferences outside the usual laboratory setting by engaging fish farmers in a field experiment involving real cash incentives, as well as field surveys. The experiments and methods employed are at the frontier of research in the field of development economics. The results of the analysis presented in this thesis indicate that that risk preferences are sensitive to the method of elicitation, as well as the context or domain in which it is elicited. While contrary to findings from other studies, risk averse farmers are more prone to adopt improved fish farming technologies earlier than farmers who are not risk averse. This conclusion is plausible because the technologies may be perceived as risk-reducing by the farmers. This outcome remains robust when ambiguity aversion is introduced into the analysis of the technology adoption decision. Therefore, research on farmer production choices should take their risk attitudes into account, and such risk attitude measures should be elicited in a manner that is compatible with the context of operation of the farmers.

Forthcoming

  • Crentsil, C., Gschwandtner, A. and Wahhaj, Z. (2020). The Effects of Risk and Ambiguity Aversion on Technology Adoption: Evidence from Aquaculture in Ghana. Journal of Economic Behavior and Organization.
    We study how aversion to risk and ambiguity affects the adoption of new technologies by Ghanaian smallholder aquafarmers. We conduct a set of field experiments designed to elicit farmers’ risk and ambiguity preferences and combine it with survey based information on their technology adoption decisions. We find that aquafarmers who are more risk-averse were quicker to adopt the new technologies: a fast-growing breed of tilapia fish, extruded feed and floating cages. By contrast, ambiguity aversion has no effect on the adoption of the new tilapia breed and extruded feed. Furthermore, it slows down the adoption of floating cages - a technology which entails higher fixed costs than the others - and the effect is diminishing in the number of other adopters in the village. We argue that these differential effects are due to the fact that the technologies are risk-reducing, with potential ambiguity about their payoffs? distributions at the early stages of adoption. The findings highlight the importance of distinguishing between risk and ambiguity in investigating technology adoption decisions of small-holder farmers in developing countries.
  • Gschwandtner, A., Kambhampati, U. and Jewell, S. (2014). On the Relationship between Lifestyle and Happiness in the UK.
    In the present paper we attempt to analyse the relationship between ‘lifestyle’ and happiness in the UK using an instrumental variable approach. Our lifestyle variables have a significantly positive impact on happiness and the impact increases with the use of instruments. This suggests that a ‘healthy lifestyle’ has a positive impact on happiness and that any policy improving our lifestyle proxies would also make people happier in the UK.
  • Gschwandtner, A. and Hirsch, S. (2014). Sustained Firm Profitability: A study of the US and EU food porcessing industry.
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