Pesticide Externalities and Spatial Coordination Failure in Mixed Farming Landscapes

The coexistence of conventional and low-input farming methods transforms what appears to be an indi-vidual optimization problem into a collective action dilemma that subsidies and landscape features alone cannot resolve. This paper provides the first large-scale, field-level causal evidence of how exposure to pes-ticide externalities from conventional neighbors affects the diffusion of low-input systems through economic channels by creating spatial coordination failures. Using French administrative panel data on 9.5 million agricultural parcels and exploiting quasi-experimental variation in exposure induced by exogenous wind and topographic gradients, I investigate changes in local organic farming adoption and maintenance. Results reveal a modest, but persistent reduction in organic farming of approximately 2.8% relative to the mean, which is above most of exogenous and correlated peer effects. I show that these edge-effect externalities impose heterogeneous costs on organic producers due to certification-threatening risks from involuntary nonpoint source pollution (via runoff and drift), and an incomplete insurance market that prevents hedging these shocks. These findings highlight the need for coordinated spatial policies and complementary risk management instruments to mitigate the risk of cross-parcel pesticide contamination.