Are Organic Farms Less Efficient? The Case of Estonian Dairy Farms

Imre FertőZoltán BakucsAnts-Hannes ViiraOlha AleksandrovaHelis Luik-LindsaarRaul Omel

DOI 10.7160/aol.2024.160103
No 1/2024, March
pp. 23-34

Fertö, I., Bakus, Z., Viira, A.-H., Alekandrova, O., Luik-Lindsaar, H. and Omel, R. (2024) "Are Organic Farms Less Efficient? The Case of Estonian Dairy Farms", AGRIS on-line Papers in Economics and Informatics, Vol. 16, No. 1, pp. 23-34. ISSN 1804-1930. DOI 10.7160/aol.2024.160103.

Abstract

The paper investigates the technical efficiency of conventional and organic dairy farms in Estonia in the period 2006‒2015 using Farm Accountancy Data Network. We analyse self-selection into organic farming using the propensity-score-matching approach and explicitly test the hypothesis that organic and conventional farms apply homogeneous technology. We find that organic farms are less efficient. However, the difference in technical efficiency between organic and conventional farms decreases substantially when the technical efficiency assessment incorporates the use of the appropriate technology. The lack of growth of technical efficiency over time indicates that there might be a lack of knowledge in organic milk production that hinders its development. Since technical efficiency increases with farm size, it is important that organic dairy farms increase their scale.

Keywords

Production function, technical efficiency, milk production, propensity score matching.

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