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Opportunity Costs of Providing Crop Diversity in Organic and Conventional Farming: Would Targeted Environmental Policies Make Economic Sense?

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  • Sipilainen, Timo
  • Huhtala, Anni

Abstract

Targeted environmental policies for farmlands may improve the cost-efficiency of conservation programs if one can identify the farms that produce public goods, or environmental outputs, with the least cost. We derive shadow values of producing crop diversity on conventional and organic crop farms to examine their opportunity costs of conservation. Non-parametric distance functions are estimated by applying data envelopment analysis to a sample of Finnish crop farms for the period 1994 – 2002. Our results show that there is variation in the shadow values between farms and the technologies adopted. The extent of cost heterogeneity and farms’ potential for specialization in the production of environmental outputs determine whether voluntary programs such as auctions for conservation payments are economically reasonable.

Suggested Citation

  • Sipilainen, Timo & Huhtala, Anni, 2011. "Opportunity Costs of Providing Crop Diversity in Organic and Conventional Farming: Would Targeted Environmental Policies Make Economic Sense?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114527, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae11:114527
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    References listed on IDEAS

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    Cited by:

    1. Biagia De Devitiis & Ornella Wanda Maietta, 2015. "Shadow Prices of Human Capital in Agriculture. Evidence from European FADN Regions," CSEF Working Papers 415, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. 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;Western Agricultural Economics Association.
    3. Sueyoshi, Toshiyuki & Yuan, Yan & Goto, Mika, 2017. "A literature study for DEA applied to energy and environment," Energy Economics, Elsevier, vol. 62(C), pages 104-124.
    4. Lakner, Sebastian & Breustedt, Gunnar, 2015. "Efficiency analysis of organic farming systems- a review of methods, topics, results, and conclusions," 2015 Conference, August 9-14, 2015, Milan, Italy 212025, International Association of Agricultural Economists.
    5. Bostian, Moriah B. & Herlihy, Alan T., 2014. "Valuing tradeoffs between agricultural production and wetland condition in the U.S. Mid-Atlantic region," Ecological Economics, Elsevier, vol. 105(C), pages 284-291.

    More about this item

    Keywords

    biodiversity; Shannon index; DEA; distance functions; shadow values; Crop Production/Industries; Environmental Economics and Policy; C21; D24; H41; Q12; Q24;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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