Traditional Versus Improved Varieties of Seed: Is There a Trade‐Off Between Productivity and Risk?

ABSTRACT We examine how the choice of seed technology—between traditional and improved varieties—impacts crop revenue and the cost of risk in a setting characterized by high uncertainty. The methodological approach combines computation of crop revenue and cost of risk based on moment‐based approximation of a stochastic production function, with a selection‐bias correcting endogenous switching regression estimation. The analysis employs plot level panel data from Ethiopia collected in the years 2021 and 2023. We find that improved seed technology adoption increases crop revenue (Br. 2209/ha) and the cost of risk (Br. 609/ha), overall, compared with traditional seeds adoption. This implies potential tradeoffs between revenue and risk in seed‐ adoption at plot level. Further, in instances where each of the two seed types are adopted, the overall farm income from the technologies would total Br 1600 (for improved seeds) and Br. 485 (for traditional seeds) indicating complementarity in the use of the two sources of seeds at farm level. The results are robust to the number of crops used in the analysis, and disaggregation by farm size. The findings provide useful information in the design of policies that strive to design efficient seed systems that have simultaneous provision of improved and traditional seeds.