Analysing Profits and Economic Behaviour of Organic and Conventional Dutch Arable Farms

Abstract

This paper uses a micro-econometric model to analyse differences in variable profits and economic behaviour between organic and conventional arable farms. Insight in factors underlying these differences is essential in designing policy measures that aim at encouraging the transition to a more sustainable farming practice. The framework is applied to a rotating panel of Dutch conventional and organic arable farms over the period 1990-1999. The results show that the, on average larger variable profit of organic farms is mainly associated with the use of land and technological changes. The shadow price of labour suggests over-use of labour on organic arable farms. Demand for pesticides and supply of output are generally more elastic on organic farms. Furthermore, organic farmers that increase the size of their farm are found to become more dependent on the use of pesticides and are found to increase the intensity of the use of land.