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Adoption of organic farming in Germany and Austria: an integrative dynamic investment perspective

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  • Oliver Musshoff
  • Norbert Hirschauer

Abstract

Farm-level adaptation to changing economic environments is often slower than expected. Technological innovations, for instance, are frequently adopted at a later date than the net present value of investment suggests. This can be explained by a model of "investment under uncertainty," which consistently accounts for uncertainty, sunk costs, and the flexibility of investment timing. Its essential conclusion is that, due to temporal opportunity costs, critical incremental cash flows that trigger investments might be higher than those needed for simple cost recovery. This accounts for an ostensible reluctance to invest (economic hysteresis). In this article, we demonstrate how slow conversion to organic farming in general, and the different rates of conversion in Germany and Austria in particular, can be explained by the new investment theory. Copyright (c) 2008 International Association of Agricultural Economists.

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Bibliographic Info

Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

Volume (Year): 39 (2008)
Issue (Month): 1 (07)
Pages: 135-145

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Handle: RePEc:bla:agecon:v:39:y:2008:i:1:p:135-145

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Cited by:
  1. Ihli, Hanna Julia & Musshoff, Oliver, 2013. "Understanding the Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150331, Agricultural and Applied Economics Association.
  2. Ihli, Hanna Julia & Musshoff, Oliver, 2013. "Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis," Discussion Papers, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development 154775, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
  3. Musshoff, Oliver & Hirschauer, Norbert, 2008. "Investment planning under uncertainty and flexibility: the case of a purchasable sales contract," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, Australian Agricultural and Resource Economics Society, vol. 52(1), March.
  4. Mzoughi, Naoufel, 2011. "Farmers adoption of integrated crop protection and organic farming: Do moral and social concerns matter?," Ecological Economics, Elsevier, Elsevier, vol. 70(8), pages 1536-1545, June.
  5. Ihli, Hanna Julia & Maart, Syster Christin & Musshoff, Oliver, 2012. "Investment and Disinvestment in Irrigation Technology – An Experimental Analysis of Farmers’ Decision Behavior –," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124532, Agricultural and Applied Economics Association.
  6. Tzouramani, Irene & Sintori, Alexandra & Liontakis, Angelos E. & Alexopoulos, George, 2010. "Assessing agricultural policy incentives for Greek organic agriculture: A Real options approach," 114th Seminar, April 15-16, 2010, Berlin, Germany, European Association of Agricultural Economists 61096, European Association of Agricultural Economists.
  7. Heyder, Matthias & Theuvsen, Ludwig & Hollmann-Hespos, Thorsten, 2012. "Investments in tracking and tracing systems in the food industry: A PLS analysis," Food Policy, Elsevier, Elsevier, vol. 37(1), pages 102-113.
  8. Lakner, Sebastian, 2009. "Technical efficiency of organic milk-farms in Germany - the role of subsidies and of regional factors," 2009 Conference, August 16-22, 2009, Beijing, China, International Association of Agricultural Economists 51301, International Association of Agricultural Economists.
  9. Andoseh, Stephen & Bahn, Rachel & Gu, Jenny, 2014. "The case for a real options approach to ex-ante cost-benefit analyses of agricultural research projects," Food Policy, Elsevier, Elsevier, vol. 44(C), pages 218-226.
  10. Wollni, Meike & Andersson, Camilla, 2014. "Spatial patterns of organic agriculture adoption: Evidence from Honduras," Ecological Economics, Elsevier, Elsevier, vol. 97(C), pages 120-128.

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