Do the opportunity costs of providing crop diversity differ between organic and conventional farms? The case of Finnish agriculture

Summary

The attractiveness of targeted environmental policies on farmlands depends crucially on the
opportunity costs of the conservation programs. We use a crop diversity index as an indicator of
environmental output to compare the efficiency of conventional and organic crop farms. Technical
efficiency scores are estimated by applying data envelopment analysis to a sample of Finnish farms
for the period 1994 – 2002. We also estimate shadow values, or the opportunity costs, of producing
crop diversity. Our results show that there is variation in the shadow values between farms and the
technology adopted. The findings provide a basis for designing cost-effective policy instruments
such as auctions for conservation payments.