Technical Efficiency among Organic and Conventional Farms in Sweden 2000-2002: A Counterfactual and Self-Selection Analysis

Technical efficiency and its determinants among organic and conventional farms in Sweden are analyzed for time-period 2000-2002. In addition, we address the issues that arise when comparing performance measures among the two groups of producers (conventional and organic) due differences in their technologies and the potential presence of self-selection in the farmer's choice of using conventional or organic production methods. If the choice of production method is based on, or at least in part based on, the farms expected productivity in organic and conventional farming respectively there is self-selection present that must be considered. We apply an endogenous switching regression model suggested by Lee (1978) to compare efficiency measures between the two groups that also allows for testing for the presence of self-selection. The results suggest that organic producers have a lower average technical efficiency which is expected because they use a more restricted technology. Moreover, the results suggest that the organic farmers are on average more efficient in organic production than the average conventional would have been in organic production.