Factor Market Failures and the Adoption of Irrigation in Rwanda

Factor market failures can limit adoption of profitable technologies. We leverage a plot-level spatial regression discontinuity design in the context of irrigation use by farmers provided free access to water. Using irrigation boosts profits by 43–62 percent. Yet, farmers only irrigate 30 percent of plots because of labor costs. We demonstrate inefficient irrigation use, by showing farmers irrigating one plot reduce their irrigation use on other plots. This inefficiency is largest for smaller households and wealthier households, suggesting labor market frictions constrain use of irrigation. (JEL D24, O13, Q12, Q15, Q16)