Agricultural Supply Response and Smallholders Market Participation: the Case of Cambodia

This paper explores the key causal factors behind agricultural supply response and farmers' market participation decisions in Cambodia. A stylized farm household model with market imperfections is considered and a two-step decision making process is outlined. Farmers decide, first, whether or not to participate in the market and then they decide how much to sell. The model is estimated using a Heckman type regression model. We compute the unconditional marginal effects for the full sample as well as for the samples for the small and large holders separately. Non-price factors such as risk, technology and rural infrastructure are important determinants of commercialization of agriculture in Cambodia. The marginal effects for the small and large holders differ substantially both in quantitative and qualitative terms. This suggests differential treatment in terms of intervention and incentives for small and large holders would be more effective to promote market access.