attribution of support was random regarding those characteristics influencing adoption and that there would be no endogeneity problem in the regression analysis.
We hypothesized that improved access to credit would be conducive to the
adoption of agroforestry based SCT because it relaxes liquidity and/or consumption
constraints and reduces farmers’ discount rates (cf. Chap. 5). This means that a
farmer will value the future benefits from reduced soil erosion more if credit is
accessible (Holden et al. 1998; Pender 1996). We used a binary variable indicating
whether a household was credit constrained on the formal credit market, and
following Zeller (1994), considered farmers to be credit constrained if they did
not apply for credit for fear of rejection or if they applied for a loan but were
partially or fully rejected by the lenders.
10
Since the use of SCT represents a long-term investment in land quality, we
hypothesized secure land tenure to be an important adoption incentive. In Yen
Chau, formal land use right certificates (so-called ‘Red Books’) were first issued to
farmers in 1991, granting them use rights for 20 years in the case of annual and
50 years in the case of perennial cropland (cf. Saint-Macary et al. 2010). The
possible effect of this land titling policy on the adoption of agroforestry was
captured in the model using five variables. A first variable measured a household’s
share of upland area covered by the Red Book. A positive and significant coefficient
indicated that the land title was perceived as a guarantee of tenure security, thus
encouraging farmers to engage in soil conservation practices. Several empirical
studies have found evidence that tenure security may be endogenous to investment,
as farmers may undertake certain investments to secure tenure and obtain land titles
(Besley 1995; Brasselle et al. 2002; Place and Swallow 2000). In our case, the fact
that land titles had been distributed to all households at a certain point in time
(cf. Saint-Macary et al. 2010) excluded this risk of endogeneity.
The implementation of the land policy in the study area has resulted in successive
land reallocations, and we found that 79 % of farmers expected further reallocations
to take place before the end of the use rights term. While the issuance of a land title
was supposed to empower farmers as decision-makers over the use of their land, the
successive reallocations may have sent a contradictory signal; that the state remains
the primary decision-maker over land issues. We included four variables to capture
these effects (cf. Table 7.7): (1) a dummy variable indicating whether the household
had experienced a reallocation on its upland plots, (2) the share of households in the
village (excluding the respondent household) that had experienced upland
reallocations, (3) a dummy variable indicating whether the household believed a
reallocation was likely to occur before the end of the use-rights term, and (4) the share
of villagers (excluding the respondent household) expecting such a reallocation.
These variables were only very weakly correlated (Pearson correlation coefficients
0.2), giving no cause for concern regarding multi-collinearity.
10 The literature on credit and technology adoption suggests that this variable is endogenous (i.e.,
correlated with unobserved factors of adoption, such as entrepreneurial capacity). The test of
endogeneity conducted on this variable did not reject exogeneity, based on various specifications
and measures of credit access. We therefore treated this variable as exogenous in the model.
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T. Hilger et al.
We hypothesized that improved access to credit would be conducive to the
adoption of agroforestry based SCT because it relaxes liquidity and/or consumption
constraints and reduces farmers’ discount rates (cf. Chap. 5). This means that a
farmer will value the future benefits from reduced soil erosion more if credit is
accessible (Holden et al. 1998; Pender 1996). We used a binary variable indicating
whether a household was credit constrained on the formal credit market, and
following Zeller (1994), considered farmers to be credit constrained if they did
not apply for credit for fear of rejection or if they applied for a loan but were
partially or fully rejected by the lenders.
10
Since the use of SCT represents a long-term investment in land quality, we
hypothesized secure land tenure to be an important adoption incentive. In Yen
Chau, formal land use right certificates (so-called ‘Red Books’) were first issued to
farmers in 1991, granting them use rights for 20 years in the case of annual and
50 years in the case of perennial cropland (cf. Saint-Macary et al. 2010). The
possible effect of this land titling policy on the adoption of agroforestry was
captured in the model using five variables. A first variable measured a household’s
share of upland area covered by the Red Book. A positive and significant coefficient
indicated that the land title was perceived as a guarantee of tenure security, thus
encouraging farmers to engage in soil conservation practices. Several empirical
studies have found evidence that tenure security may be endogenous to investment,
as farmers may undertake certain investments to secure tenure and obtain land titles
(Besley 1995; Brasselle et al. 2002; Place and Swallow 2000). In our case, the fact
that land titles had been distributed to all households at a certain point in time
(cf. Saint-Macary et al. 2010) excluded this risk of endogeneity.
The implementation of the land policy in the study area has resulted in successive
land reallocations, and we found that 79 % of farmers expected further reallocations
to take place before the end of the use rights term. While the issuance of a land title
was supposed to empower farmers as decision-makers over the use of their land, the
successive reallocations may have sent a contradictory signal; that the state remains
the primary decision-maker over land issues. We included four variables to capture
these effects (cf. Table 7.7): (1) a dummy variable indicating whether the household
had experienced a reallocation on its upland plots, (2) the share of households in the
village (excluding the respondent household) that had experienced upland
reallocations, (3) a dummy variable indicating whether the household believed a
reallocation was likely to occur before the end of the use-rights term, and (4) the share
of villagers (excluding the respondent household) expecting such a reallocation.
These variables were only very weakly correlated (Pearson correlation coefficients
0.2), giving no cause for concern regarding multi-collinearity.
10 The literature on credit and technology adoption suggests that this variable is endogenous (i.e.,
correlated with unobserved factors of adoption, such as entrepreneurial capacity). The test of
endogeneity conducted on this variable did not reject exogeneity, based on various specifications
and measures of credit access. We therefore treated this variable as exogenous in the model.
264
T. Hilger et al.