Economic impact of organic agriculture hotspots in the United States

Abstract

AbstractIn this paper, we assess whether or not organic agriculture has a positive impact on local economies. We first identify organic agriculture hotspots (clusters of counties with positively correlated high numbers of organic operations) using spatial statistics. Then, we estimate a treatment effects model that classifies a county's membership in an organic hotspot as an endogenous treatment variable. By modeling what a hotspot county's economic indicators would have been had the county not been part of a hotspot, this model captures the effect of being in a hotspot on a county's economic indicators. We perform the same analysis for general agricultural farm hotspots to confirm that the benefits associated with organic production hotspots are, in fact, due to the organic component. Our results show that organic hotspot membership leads to a lower county-level poverty rate and a higher median household income. A similar result is not found when investigating the impact of general agriculture hotspots. On the other hand, our result is robust to alternative hotspot definitions based on type of organic operations to alternative methods of estimating average treatment effects on the treated. These results provide strong motivation for considering hotspots of organic handling operations, which refers to middlemen such as processors, wholesalers and brokers, and hotspots of organic production to be local economic development tools, and may be of interest to policymakers whose objective is to promote rural development. Our results may incentivize policymakers to specifically focus on organic development, rather than the more general development of agriculture, as a means to promote economic growth in rural areas, and may further point them in the direction of not only encouraging the presence of organic operations, but of fostering the development of clusters or hotspots of these operations.