Economic Effects of Organic Farming in Taiwan: Empirical Evidence from Population-Based Farm Household Data

Organic farming has been viewed as one of the promising farming practices of sustainable agricultural production. Evaluating the economic effects of organic farming is important while promoting environmental-friendly policies. Considering the four major components of the cropping system and spatial agglomeration effects, this study looks into three kinds of economic performancessales revenue, cost and profit, for rice farm households in Taiwan using large-scale national data drawn from the 2015 agriculture census. We apply the analysis of local indicators of spatial associations to gain a better understanding of the patterns of organic farming clusters. The spatial clusters are then incorporated into the Probit-2SLS instrumental variable model, finding that organic farming adoption leads to a significantly positive effect on rice farms’ economic performances in 2 turns of cost reduction and profit increase. This positive treatment effect can be further increased through spatial agglomeration. Moreover, the treatment effect of organic farming is found to vary with the farm characteristics such as farmland area and the number of hired workers. For practical implications, establishing organic agriculture specialized zones or providing economic incentives to small farms to expand their scale may be a more effective policy means to promote sustainable agrifood production.