EFFICIENCY IN AGRICULTURAL PRODUCTION OF BIODIVERSITY: ORGANIC VS. CONVENTIONAL PRACTICES

Abstract

Promotion of environmental sustainable farming practices is an important policy goal for the whole agricultural sector. However, when the efficiency of production is measured in practice, enhancement of environmental quality such as biodiversity and other environmental amenities does not seem to be recognized as a positive output produced by agriculture. Here, we include crop diversity index as an indicator of environmental output in a comparison of efficiency of conventional and organic crop farms. Non-parametric technical efficiency scores are estimated applying data envelopment analysis on a sample of Finnish crop farms for 1994 – 2002. The results show that in a pooled data set conventional crop farms are more technically efficient than organic farms when only crop output is considered. When taking crop diversity into account the difference between production techniques vanishes. In separate comparisons of conventional and organic farms, the average efficiencies of the two groups do not differ statistically significantly. Thus, the assumptions on the technology and reference sets are crucial with respect to the results of the comparison. This has important implications for policy evaluations when alternative farming technologies are compared.crop diversity, Shannon index, DDEA, technical efficiency, Environmental Economics and Policy, Farm Management, Research Methods/ Statistical Methods,