Biodiversity productive effects in milk farms of western France: a multi-output primal system

It is widely recognized that human activities and especially agriculture have negative impacts on biodiversiy. However, biodiversity can also benefit to farmers through its positive effects on production. This two-way causality relationship between biodiversity and agriculture has raised numerous authors to examine the behaviour of farmers regarding environment. However, only few empirical studies have analysed biodiversity management considering previous results in production economics. Indeed, they usually do not take into account farmers’ strategic choices. These studies did notably not correct for the endogenous bias linked to simultaneity of choices between input and output levels and did not take into account market evolution. On the other hand, production economic studies have rarely introduced ecological feedbacks in the production function and prefer to analyse environmental effects in an ex-post way. On this paper, we estimate crop and milk primal production functions of a sample of mixed farms of western France. Our sample is composed of 5654 FADN observations from 2002 to 2014 in French regions of Bretagne, Basse-Normandie and Pays-de-la-Loire. We estimate the productive effect of biodiversity taking into account for the variable input endogenous biases and joint technology specificity. Using Three Stage Least Square method, we estimate linear and quadratic of both production functions with ad-hoc addition of variable input demand functions. We measure biodiversity through the utilization of landscape metric indicators. For the first time in this literature, we examine the effect of two kind of biodiversity: arable land biodiversity and permanent grassland biodiversity. Our preliminary results seem to confirm previous results of the literature on the productive effect of arable land biodiversity on crop production. For the first time in empirical economics analysis, we find that permanent grasslands enhance crop production. On the other side, milk production is less sensible to biodiversity but it seems that permanent grasslands decrease milk production. The effect of arable land biodiversity on milk production is not robust for the moment. Our results can be useful for policymakers as they bring new insights on the management of biodiversity by farmers.