Description:

Speaker Felipe Berrutti

Title "Price Regulation of Agricultural Technology" (joint with Matteo Ruzzante)

Abstract:
Regulating the price of essential productive inputs can allow governments to improve the affordability of productivity-enhancing technologies and boost their diffusion among low-income households. However, in contexts where pricing stands as the main device to recover R&D costs, it can deter private firms from investing in innovation and introducing superior technologies. This project studies the demand and supply-side consequences of price controls on genetically engineered (GE) cotton seeds in India. Leveraging the differential timing of this policy across states, we show that the government-mandated price reduction increased farmers’ adoption of GE seeds by 20% and decreased the costs of cultivating cotton by 20%. We also document that firms reduce the number of products they release to the market, leading farmers to use older seeds. Using data from several experimental field trials across India, we show that 1) cotton varieties lose 6% of their yield yearly after being released and 2) yields of new products decrease by 30% in states with price controls. To quantify the overall welfare impact of the policy, we develop a structural model of demand and supply for seeds.