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The Impact of Dynamic Profit Maximization on Biodiversity: A Network DEA Application to UK Cereal Farms

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  • Ang, Frederic
  • Mortimer, Simon
  • Areal, Francisco
  • Tiffin, Richard

Abstract

Using a nonparametric framework, we analyse the impact of dynamic profit maximization on biodiversity for a sample of UK cereal farms for the year 2007. Recognizing the drawbacks of directly implementing biodiversity as an output or input in a distance function framework, we only consider inputs and outputs that are clear choice variables from the firm’s perspective. We use a dynamic, intertemporal profit function to take into account adjustment costs. We assess how dynamic profit maximization may shift land use allocation and, as a consequence, the Shannon index for crop diversification. Doing so allows us to calculate the shadow prices of crop diversification in a novel way that is consistent with the dynamic theory of the firm.

Suggested Citation

  • Ang, Frederic & Mortimer, Simon & Areal, Francisco & Tiffin, Richard, 2015. "The Impact of Dynamic Profit Maximization on Biodiversity: A Network DEA Application to UK Cereal Farms," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205857, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea15:205857
    DOI: 10.22004/ag.econ.205857
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    References listed on IDEAS

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    Keywords

    Environmental Economics and Policy; Land Economics/Use; Production Economics;
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