Conference paper, poster, etc. #40579

Summary

Several papers have investigated the determinants of conversion to organic farming, and pointed out the positive role of public support on the decision to convert. In this paper we investigate whether the conversion subsidy schemes may attract ‘subsidy-hunters’ who are not, in general, the most efficient farmers. Using panel data we test this adverse selection problem on a sample of French farms for the period 1999-2006, by measuring the impact of past technical efficiency on the decision to convert to organic farming. In the first stage we compute farmers’ yearly efficiency scores using several competing approaches in order to derive robust conclusions, including non-parametric techniques (Data Envelopment Analysis, Free Disposal Hull) as well as the (parametric) stochastic frontier approach. In the second stage we hypothesize that farmers’ decision to convert to organic farming is influenced by their social characteristics, their current practices, the geographical location of the farm, and exogenous factors including government policies. Results indicate that farmers who are less technically efficient are more likely to engage in organic farming, and that farmers who received subsidies from agri-environmental schemes, including support to convert to organic farming, are more likely to adopt the organic technology.