Dadan Wardhana: Farmer Performance under Peer Pressure in Agro-clusters

The higher the density of farmers in agricultural agglomerations, the higher the pressure on farmers might result from peers from purchasing production factors and successful marketing. Therefore we assess whether competitive pressure from peers in agro-clusters perceived by farmers affects their behavior. We consider the two options that farmers may either be cooperative with peers in sharing knowledge or withhold it due to selfishness. Building on the theory of planned behavior and the behavioral interaction model, we develop a conceptual model which we econometrically test based on primary data from 1,250 farmers in Indonesia.

We find robust evidence for that both the various aspects of peer pressure measured as well as the density of agro-clusters impact the behavior of farmers as well as poverty, food insecurity and location in rural areas do. In high density agglomeration environments, lower degrees of peer pressure foster cooperative behavior while higher degrees tend to produce higher levels of self-interest behavior. Moreover, the effect of farmer’s behavior on income significantly varies by the region of the island of Java the farmer is located in. As Indonesian farm policies aim at increasing the cooperation between farmers to ease the informal spread of innovation, policies strengthening agro-clusters should aim at decreasing peer pressure perceived by farmers located in them.