Can Peers Improve Agricultural Revenue?

Crop revenues vary greatly among farmers and the source of that variation is not fully understood, even after controlling for factors including input use, technology adoption, and other agro-climatic factors. One hypothesis that may explain the variation in outcomes among farmers is differential access to information through peers. Using a household survey from India containing detailed information about personal relationships, we estimate peer effects on cash crop revenue using a novel spatial econometric technique to control for reflection. Our results show that 60% of farmers' revenue is explained by peers. Peer effects are particularly large in pesticide use and in the cultivation of a new crop. However, peer effects in input expenditures and land allocation cannot fully explain the variation in revenue, implying peers may also associate with management, negotiation, and marketing. We find that peer effects are significant among farmers' self-reported peers, especially among those peers who are farmers' main advisors for agricultural matters. Although caste-based networks (both within the same and in adjacent villages) are important, their effect is smaller than that of self-reported peer networks. We empirically rule out that our effects are driven by other factors such as geographically correlated unobservables, farmers following a lead farmer or economies of scale. Our findings speak to both the potential and the limitations of peers as sources of agricultural information, and highlight the need for future research about how to best integrate peers into agricultural extension.