Tarnishing Silver Bullets: Bt Technology Adoption, Bounded Rationality and the Outbreak of Secondary Pest Infestations in China

As with other technologies, adoption of Bt seed requires technology specific knowledge. Growing secondary pest populations have slowly eroded the benefits of Bt technology in China. We illustrate the effects of introducing Bt technology among farmers with an imperfect knowledge of secondary pest problems using a simple dynamic model. The stochastic dominance tests based on primary household data from 1999-2001 and 2004 in China provide strong evidence that secondary pests, if unanticipated, could completely erode all benefits from Bt cotton cultivation. Our empirical tests also suggest that planting refuge concurrent with Bt adoption provides for the sustainable development of Bt technology. * Acknowledgement: We are grateful to Jikun Huang and the staff of the Center for Chinese Agricultural Policy (CCAP) for collaboration on data collection. Also, the theoretic dynamic model in this paper has benefited greatly from Jon Conrad, professor at Department of Applied economics and Management, Cornell University.