Opportunity Costs of Providing Crop Diversity in Organic and Conventional Farming

Targeted environmental policies for farmlands may improve the cost-efficiency of conservation programs if one can identify those farms that produce public goods with the least cost. We derive shadow values of producing crop diversity for a sample of Finnish conventional and organic crop farms in the period 1994-2002 in order to examine their opportunity costs of conservation. Our results of Data Envelopment Analysis show that there is variation in the shadow values between farms and between the technologies adopted. The degree of cost heterogeneity and farms’ potential for specialization in the production of environmental outputs determine whether voluntary programs such as auctions for conservation payments are economically reasonable.