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Does Organic Conversion Pay? Evidence from German Farms Using a Difference-in-Differences Approach

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  • Boy, Karl-Friedrich
  • Peña-Lévano, Luis
  • Latacz-Lohmann, Uwe

Abstract

Climate change and evolving regulations in the European Union (EU) place increasing pressure on agriculture to reduce its carbon footprint while remaining economically viable. The Farm-to-Fork strategy positions organic farming as a cornerstone of sustainable food systems, aiming for 25% of EU agricultural land to be organic by 2030. Yet, the economic feasibility of making this transition remains contested. This study provides a robust assessment on changes in farm profitability of transitioning from conventional to organic farming in Germany. Using a uniquely comprehensive large dataset of 1,048,139 farm-year observations from 54,817 farms (between 1995 and 2018), we identify all converting farms and match them to structurally similar nonconverting “twin” farms. A difference-in-Differences framework adapted for staggered adoption and fixed effects estimates the impact of conversion on operating profit. Preliminary results indicate an average post-conversion increase of €11,580 per year. Effects vary by region and farm type, underscoring heterogeneity in economic outcomes. These findings highlight the complexity of aligning environmental goals with farm-level incentives and demonstrate the value of long-run panel data for evidence-based policy. Further research will refine identification and explore distributional impacts to inform strategies under the EU Green Deal.

Suggested Citation

  • Boy, Karl-Friedrich & Peña-Lévano, Luis & Latacz-Lohmann, Uwe, 2026. "Does Organic Conversion Pay? Evidence from German Farms Using a Difference-in-Differences Approach," 100th Annual Conference, March 23-25, 2026, Wadham College, University of Oxford, Oxford, UK 397883, Agricultural Economics Society (AES).
    • Handle: RePEc:ags:aes026:397883
    DOI: 10.22004/ag.econ.397883
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    References listed on IDEAS

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    1. Matthias Balz, 2018. "Branchen im Blickpunkt: Ökologische Landwirtschaft in Deutschland – eine Bestandsaufnahme," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(03), pages 43-45, February.
    2. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
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