SIMULTANEITY OF TECHNOLOGY ADOPTION AND PRODUCTIVITY

A simultaneous equation generalized probit model is estimated to deter mine factors affecting technology adoption by California dairy farmers . Since productivity and technology choice are jointly determined, a s ingle-equation approach to determine whether productivity affects tech nology adoption is subject to simultaneity bias. Since the system of e quations contains both continuous and discrete endogenous variables, g eneralized probit is used. The findings indicate that the biased singl e-equation estimates tend to exaggerate relationships with explanatory variables, and in some cases, lead to different implications. This em phasizes the need to use the consistent and asymptotically more effici ent generalized probit results to account for simultaneity.