Breathtaking or Stagnating? - Productivity, Technical Change and Structural Dynamics in Danish Organic Farming

This paper attempts to quantitatively measure the change in the productivity of Danish organic farming in recent years by using panel data on 56 organic farms mainly engaged in milk production for the period 2002 to 2004. Based on a translog production frontier framework the technical and scale efficiency on farm level is analyzed by considering also curvature consistency. The total change in productivity for the reference period is measured by using the Malmquist total factor productivity index approach based on a time trends as well as a general index model specification. Input specific bias in technical change as well as a general index model specification. Input specific bias in technical change as well elasticities of input substitution are analyzed. Factors for the development of technical change and the change in efficiency over time are investigated by applying a bootstrapped ITSUR techniques. Finally we try to conclude on the significance of subsidies for promoting long term growth in organic production by estimating a bootstrapped bivariate probit model with respect to factors influencing the probability of organic market exit. The results revealed significant difference in the organic farms' technical efficiency, no significant total factor productivity growth and even a slightly negative rate of technical change in the period investigated. We found evidence for a positive relationship between subsidy payments and an increase in farm efficiency, technology improvements and a decreasing probability of organic market exit which was also confirmed for off farm income. Finally the general index mode specification was found to deliver a more accurate mapping of total factor productivity growth.