Good policy evaluation needs good data—A note on the use of environmental indicators in agricultural production analysis

Abstract

In recent years, the concept of sustainably increasing productivity in agriculture has gained popularity in agricultural policy debates. This has also raised interest among agricultural economists, especially production economists, in including environmental outcomes in efficiency or productivity analyses and in identifying sources of sustainable productivity growth in a reliable manner. However, such assessments at the farm level are often hindered by the lack of data with which to derive appropriate, meaningful, and relevant (social and environmental) indicators. Ignoring these data limitations, many scholars use simple indicators based, for example, on the European Union's Farm Accountancy Data Network or the Australian Agricultural and Grazing Industries Survey data that poorly reflect the actual environmental performance of farms. While the need to use environmental information is obvious, the argument of using simple indicators rather than no indicators at all has to be questioned in many cases since the estimated data will influence the outcome of the analysis. Therefore, careful attention should be given to the choice of indicators and especially to agronomic soundness.