Approaching the environmental sustainable value in agriculture: How factor endowments foster the eco-efficiency

Abstract

Abstract Small and labor-intensive farms guarantee a higher degree of environmental sustainability compared to rich, capital-intensive farms. This paper offers a methodological contribution to the value-based sustainability approach, consisting in computing a modified indicator of environmental sustainable value. Using this approach, the authors test how factor endowments such as capital, land and labor contribute to environmental sustainable value using a long-term panel of region-representative European Union farm accountancy data network farms in 2004–2015. The seminal within-between specification was employed to control time variant and time in-variant space heterogeneity of European regions. The articles main finding is that higher capital endowment and lower labor-intensity is beneficial for environmental sustainable value. The result that farming with higher labor endowment might be less eco-efficient contradicts the commonly known perception of this problem. In light of our findings, we conclude that the pro-investment direction of the common agricultural policy should be followed but one-size-fit-all policy is not working.