Modelling the impacts of policy on entry into organic farming: Evidence from Danish-UK comparisons, 1989-2007

Abstract

This paper analyses organic farming entry decisions using a piece-wise linear depiction of policy. Our goal is to ascertain, from the available but limited information, whether Danish and UK policy measures toward organic agriculture have affected participation. Despite considerable interest in the growth of organic farming there has been little systematic analysis of it, although it is commonly believed that enhanced income levels have played a part. Whilst analyses of organic farming policy have provided extensive reviews of instruments applied, generally speaking, the spirit of those enquiries takes as datum that organic policies have had the desired impacts. Yet such conjectures remain mostly untested. Hence, there is a need to examine systematically if there exist relationships between the introduction of organic farming policies and the growth of organic farming, and whether particular policy measures are more effective than others. Here, we take a first step in this endeavor by undertaking an econometric analysis of the relationship between 14 organic farming policy measures and participation rates in Denmark and the UK during 1989-2007. Using two response variables - the numbers of farmers converted to organic production and the total land area under organic practice - we implement a simple, Bayesian methodology and evaluate the stepwise-linear impacts of policy. Extensions for future work are discussed. Six policy measures in the two study countries were found to be significant influences on participation, five of them direct supply-side instruments. For the UK, all of the policies are annual subsidies for organic farmers once conversion was complete. For Denmark, the policies are the introduction of organic subsidies for non-dairy farms, the extension of subsidies beyond 1997 and support for the costs of marketing services.