Spatial effects in investment decisions: Evidence from French dairy farms

This article analyses the spatial effects in farmers’ investment decisions, in particular the role of neighbourhood effects, for the specific case of dairy farmers in a region of Western France. Investment decisions are measured by investment spikes, enabling the analysis to be linked to the literature on adoption of technology innovation. The main contribution is in accounting for the effect of the previous decisions of the farmers’ neighbours, with the help of a spatial probit econometric model that includes investment age. Results show that farmers are not immediately influenced by the simultaneously-made decisions of their neighbours, but rather by the decisions taken by their neighbours in the year before. However, this positive influence does not compensate for the negative effect of own previous investment decision