Schultz (1975) distinguished between two categories of human capital: worker ability (the ability to perform tasks more effectively) and allocative ability (the ability to deal with new situations and learn new techniques). Allocative ability is closely related to intelligence and formal education and training. Pest management requires understanding of natural systems and good decision-making capacity, and there is evidence that effectiveness of pesticide use is related to allocative ability (Weibers, 1993). Under plausible assumptions, it can be shown that increase in human capital tends to reduce pesticide use and reduce pest damage. It tends to increase the relative benefits of the traditional, pesticide-intensive variety. Thus, adoption of GMVs will be relatively more beneficial to individuals with lower human capital, as the pest-control aspect of the GMV substitutes for pest management skills. Moreover, adoption of GMVs will have a relatively higher "yield-increasing effect" for individuals with lower human capital and greater "pesticide-saving effect" for individuals with higher human capital. Both aspects of human capital may also be positively related to potential output. The net effect of human capital on adoption of GMVs depends on the relative importance of the positive impact on potential output due to adoption of GMVs and the negative impact on pesticide productivity.
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