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Neighborhood Effects on Side-Selling in Contract Farming: A Spatial Econometric Approach

Author

Listed:
  • AIDA,Takeshi
  • SHIMAMOTO,Daichi
  • TANAKA,Kiyoyasu

Abstract

Contract farming—agreements between farmers and buyers on agricultural production—often faces the challenge of contractual default because neighboring farmers may share information on more attractive price offers from non-contract buyers and coordinate actions to side-sell contract crops. This paper examines neighborhood effects on contractual enforcement in contract farming of organic Kampot pepper, a high-value crop in Cambodia. Using a spatial econometric framework, we demonstrate that side-selling by neighboring farmers significantly increases the probability of individual farmers engaging in side-selling, reflecting positive neighborhood effects. To clarify the underlying mechanisms, we develop a simple theoretical model of neighborhood effects. Our findings underscore the need for policy interventions aimed at curbing the diffusion of side-selling and strengthening the institutional sustainability of contract farming arrangements.

Suggested Citation

  • AIDA,Takeshi & SHIMAMOTO,Daichi & TANAKA,Kiyoyasu, 2026. "Neighborhood Effects on Side-Selling in Contract Farming: A Spatial Econometric Approach," IDE Discussion Papers 1003, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper1003
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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