Externality Effects of Education: Dynamics of the Adoption and Diffusion of an Innovation in Rural Ethiopia

This article investigates the role of schooling at the household and community levels in the adoption and diffusion of agricultural innovations in rural Ethiopia. We find that household-level education is important to the timing of adoption but less crucial to the question of whether a household has ever adopted fertilizer (since those without schooling may eventually copy the educated). Community-level education substitutes for low levels of household education, encouraging uneducated farmers to adopt sooner than would be predicted in the absence of educated neighbors. Moreover, community-level education is complementary to household education in determining which farmers will eventually adopt. Thus, evidence is presented to suggest that there are two externality effects: educated farmers are early innovators, providing an example that may be copied by less-educated farmers; and educated farmers are better able to copy those who innovate first, enhancing diffusion of the new technology more widely within the site.