Are the economic benefits of Bt cotton sustainable? Evidence from Indian panel data

Abstract

While several studies have shown that genetically modified Bt cotton can benefit smallholder farmers economically, the sustainability of these effects is still unclear and debated controversially between biotechnology proponents and critics. We use unique panel data of 533 cotton farmers, collected in India between 2002 and 2008, to analyze Bt impacts on cotton yield, profit, and household living standards. Results from fixed effects models show that the adoption of Bt cotton is associated with a net yield gain of 24% and a profit increase of 50%. These benefits per acre were stable over time; there are even indications that they increased. Given rising adoption rates, the aggregate benefits grew substantially. We further show that Bt cotton adoption raised consumption expenditures, our measure of household living standards, by 18% during the 2006-2008 period. We conclude that Bt cotton has created large and sustainable benefits, which contribute to economic development in India.