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Environmental Targets and Shadow Prices of Bad Outputs in Organic and Conventional Farming

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  • Huhtala, Anni
  • Marklund, Per-Olov

Abstract

We present a framework for deriving shadow prices for negative environmental impacts regulated in agriculture. The shadow prices can be used as indicators of the costs of environmental regulation imposed as reflected in alternative farming technologies adopted. We illustrate our analytical findings with implications of the Finnish water protection policy measures on conventional and organic livestock farms over the period 1994-2002. Generally, the representative organic farm is found to be more technically efficient relative to its own technology than is the conventional representative farm. However, there is no statistical indication of a difference between these two particular representative farms in valuing the costs of undesirable output (manure) at the margin.

Suggested Citation

  • Huhtala, Anni & Marklund, Per-Olov, 2005. "Environmental Targets and Shadow Prices of Bad Outputs in Organic and Conventional Farming," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24575, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae05:24575
    DOI: 10.22004/ag.econ.24575
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    References listed on IDEAS

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    1. Marklund, Per-Olov, 2004. "Essays on Productive Efficiency, Shadow Prices, and Human Capital. PhD Thesis," Umeå Economic Studies 621, Umeå University, Department of Economics.
    2. Marklund, Per-Olov, 2003. "Analyzing Interplant Marginal Abatement Cost Differences: A Directional Output Distance Function Approach," Umeå Economic Studies 618, Umeå University, Department of Economics.
    3. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June.
    4. Sipilainen, Timo & Oude Lansink, Alfons G.J.M., 2005. "Learning in Organic Farming - An Application on Finnish Dairy Farms," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24493, European Association of Agricultural Economists.
    5. Marklund, Per-Olov & Samakovlis, Eva, 2003. "What is Driving the EU Burden-Sharing Agreement: Efficiency or Equity?," Umeå Economic Studies 620, Umeå University, Department of Economics.
    6. Rolf Färe & Shawna Grosskopf, 1998. "Shadow Pricing of Good and Bad Commodities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 584-590.
    7. V. Kerry Smith, 1998. "Should Pollution Reductions Count as Productivity Gains for Agriculture?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 591-594.
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    Cited by:

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    2. Lota D. Tamini & Bruno Larue & Gale West, 2012. "Technical and environmental efficiencies and best management practices in agriculture," Applied Economics, Taylor & Francis Journals, vol. 44(13), pages 1659-1672, May.

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