Abstract
AbstractWe analyze the efficiency of organic pasture farming in Germany using data from 1994/95 to 2005/06. Five inputs and one output are analyzed by means of a stochastic frontier production function, allowing for heteroscedasticity and technical effects. Five sets of possible determinants of technical efficiency are considered in the model. These include: (1) farm structure and resources; (2) human capital and management capacities; (3) institutional choice; and (4) subsidies. To these factors that are commonly included in technical effects models, we add (5) a set of variables that capture localization and urbanization economies such as the share of organic farms in a region and the regional share of votes for the Green Party in recent elections. These regional effects are found to have a significant impact on the technical efficiency of organic farms. The evolution of efficiency on farms that are converting from conventional to organic farming is also analyzed.
Highlights
The importance of organic farming has increased rapidly in the EU and especially Germany in recent years
Designing appropriate policies requires a solid understanding of the factors, such as technical efficiency (TE) that influence the competitiveness of organic farming
We address two important questions for organic farming in Germany and elsewhere; whether location has a significant impact on TE and whether TE follows a distinct path over the course of the conversion period from conventional to organic farming
Summary
The importance of organic farming has increased rapidly in the EU and especially Germany in recent years. The importance of information exchange between farmers is probably greater for organic than for conventional farming, because until recently there were relatively few specialized extension and education/training services for organic farmers This is generally true for the western European countries that we have studied, and certainly for Germany. They include access to pooled markets for skilled labor, the regional emergence of firms that provide specific intermediate inputs, and ease of communication leading to technological spillovers All of these factors are expected to have a positive impact on TE as the number of organic farmers in a region increases. The Green Party in Germany has traditionally championed environmental issues and organic farming, and most organic farmers and their supporters come from a socio-economic background that is associated with support for the Green Party[7]
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