Organic Crowding Out? - A Study of Danish Organic Food Demand

Summary

Only a handful of studies have estimated organic food demand. These all focus on specific food sub-markets assuming separability from other food consumption. However, consumers typically associate attributes such as e.g. healthiness and environment friendliness with organic variants of most types of food. If such general organic attributes are important for consumer behaviour then separability may not hold and what could be termed organic crowding out might result. In this paper we utilize a unique Danish micro panel where all food demand is registered on a disaggregated level with an organic/non-organic indicator to estimate a general food demand system with organic variants. We clearly reject the usual separability assumption and find that our data is consistent with organic crowding out in the Danish food market. In addition estimation of a general demand system makes calculation of economy wide organic price elasticities and other insights into the structure of organic food demand possible.