Hostname: page-component-848d4c4894-m9kch Total loading time: 0 Render date: 2024-05-14T03:09:34.352Z Has data issue: false hasContentIssue false
  • English
  • Français

Investment behavior and status quo bias of conventional and organic hog farmers: An experimental approach

Published online by Cambridge University Press:  22 July 2015

Daniel Hermann ,
Oliver Mußhoff  and
Katrin Agethen
Daniel Hermann*
Affiliation:
Faculty of Agricultural Sciences, Department for Agricultural Economics and Rural Development, Georg-August-University Göttingen, Platz der Göttinger Sieben 5, D-37073 Göttingen, Germany
Oliver Mußhoff
Affiliation:
Faculty of Agricultural Sciences, Department for Agricultural Economics and Rural Development, Georg-August-University Göttingen, Platz der Göttinger Sieben 5, D-37073 Göttingen, Germany
Katrin Agethen
Affiliation:
Faculty of Agricultural Sciences, Department for Agricultural Economics and Rural Development, Georg-August-University Göttingen, Platz der Göttinger Sieben 5, D-37073 Göttingen, Germany
*
*Corresponding author: daniel.hermann@agr.uni-goettingen.de
Get access Rights & Permissions [Opens in a new window]

Abstract

Despite the economic benefits of organic farming, the conversion rates to this production method are low. The reasons for this reluctance are largely unknown; however, understanding this behavior is important for policy recommendations. Therefore, we experimentally investigate and compare the investment behavior of organic and conventional hog farmers. We examine whether the investment behavior depends on the organic or conventional farmers’ status quo of their production method. Our results show that farmers are more reluctant to invest in production methods they are not currently using compared with those already in use on their farm. Conventional, more risk-averse farmers, and those farmers holding a university degree, invest later in a hog barn. The results provide evidence that investment decisions depend on the status quo production method of a farmer and, thus, reveal that current subsidy structures may be ineffective in encouraging farmers to invest in production methods they are not currently using on their farms.

Keywords

organic farminginvestment behaviorstatus quo biasexperimental economicshog production
Type
Research Papers
Information
Renewable Agriculture and Food Systems , Volume 31 , Issue 4 , August 2016 , pp. 318 - 329
Check for updates
Copyright
Copyright © Cambridge University Press 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acs, S., Berentsen, P., Huirne, R., and van Asseldonk, M. 2009. Effect of yield and price risk on conversion from conventional to organic farming. Australian Journal of Agricultural and Resource Economics 53:393–411.CrossRefGoogle Scholar
Adesina, A.A., Mbila, D., Nkamleu, G.B., and Endamana, D. 2000. Econometric analysis of the determinants of adoption of alley farming by farmers in the forest zone of southwest Cameroon. Agriculture, Ecosystems and Environment 80:255–265.CrossRefGoogle Scholar
AMI (Agrarmarkt Informations-Gesellschaft mbH) 2013. Markt Bilanz Öko-Landbau 2013. Agrarmarkt Informations-Gesellschaft mbH, Bonn.Google Scholar
Austin, E.J., Deary, I.J., Edwards-Jones, G., and Arey, D. 2005. Attitudes to farm animal welfare. Journal of Individual Differences 26:107–120.CrossRefGoogle Scholar
Baker, R.J., Laury, S.K., and Williams, A.W. 2008. Comparing small-group and individual behavior in lottery choice experiments. Southern Economic Journal, 75:367–82.CrossRefGoogle Scholar
Barseghyan, L., Prince, J., and Teitelbaum, J.C. 2011. Are risk preferences stable across contexts? Evidence from insurance data. American Economic Review 101:591–631.CrossRefGoogle Scholar
Bello, W.B. 2008. Problems and prospect of organic farming in developing countries. Ethiopian Journal of Environmental Studies and Management 1:36–43.CrossRefGoogle Scholar
BÖLW (Bund Ökologische Lebensmittelwirtschaft E. V.) 2012. Zahlen, Daten, Fakten. Die Biobranche 2012. BÖLW, Berlin.Google Scholar
Bornett, H.L.I., Guy, J.H., and Cain, P.J. 2003. Impact of animal welfare on costs and viability of pig production in the U.K. Journal of Agricultural and Environmental Ethics 16:163–186.CrossRefGoogle Scholar
Brick, K., Visser, M., and Burns, J. 2011. Risk aversion: Experimental evidence from South African fishing communities. American Journal of Agricultural Economics 94:133–152.CrossRefGoogle Scholar
Cox, D.R. 1972. Regression models and life-tables. Journal of the Royal Statistical Society Series B (Methodological) 34:187–220.CrossRefGoogle Scholar
Cranfield, J., Henson, S., and Holliday, J. 2010. The motives, benefits, and problems of conversion to organic production. Agriculture and Human Values 27:291–306.CrossRefGoogle Scholar
Darnhofer, I., Schneeberger, W., and Freyer, B. 2005. Converting or not converting to organic farming in Austria: Farmer types and their rationale. Agriculture and Human Values 22:39–52.CrossRefGoogle Scholar
Dixit, A.K. and Pindyck, R. 1994. Investment under Uncertainty (p. 26 ff). Princeton University Press, Princeton, NJ.CrossRefGoogle Scholar
Dohmen, T., Falk, A., Huffman, D., Sunde, U., Schupp, J., and Wagner, G.G. 2011. Individual risk attitudes: Measurement, determinants and behavioral consequences. Journal of the European Economic Association 9:522–550.CrossRefGoogle Scholar
Einav, L., Finkelstein, A., Pascu, I., and Cullen, M.R. 2010. How general are risk preferences? Choices under uncertainty in different domains. NBER Working Paper No. 15686.CrossRefGoogle Scholar
Fairweather, J. 1999. Understanding how farmers choose between organic and conventional production: Results from New Zealand and policy implications. Agriculture and Human Values 16:51–63.CrossRefGoogle Scholar
Flaten, O., Lien, G., Koesling, M., Valle, P.S., and Ebbesvik, M. 2005. Comparing risk perceptions and risk management in organic and conventional dairy farming: Empirical results from Norway. Livestock Production Science 95:11–25.CrossRefGoogle Scholar
Flaten, O., Lien, G., Ebbesvik, M., Koesling, M., and Valle, P.S. 2006. Do the new organic producers differ from the ‘old guard’? Empirical results from Norwegian dairy farming. Renewable Agriculture and Food Systems 21:174–182.CrossRefGoogle Scholar
Gardebroek, C. 2006. Comparing risk attitudes of organic and non-organic farmers with a Bayesian random coefficient model. European Review of Agricultural Economics 33:485–510.CrossRefGoogle Scholar
Gardebroek, C. and Oude Lansink, A. 2004. Farm-specific adjustment costs in Dutch pig farming. Journal of Agricultural Economics 55:3–24.CrossRefGoogle Scholar
German government 2012. Nationale Nachhaltigkeitsstrategie. Fortschrittbericht 2012. German government, Berlin.Google Scholar
Hardaker, J.B., Huirne, R.B.M., Anderson, J.R., and Lien, G. 2004. Coping with Risk in Agriculture (p.23 ff), 2nd ed. CAB International, Wallingford.CrossRefGoogle Scholar
Harrison, G.W. and List, J.A. 2004. Field experiments. Journal of Economic Literature 42:1009–1055.CrossRefGoogle Scholar
Harrison, G.W., Lau, M.I., and Rutström, E.E. 2009. Risk attitudes, randomization to treatment, and self-selection into experiments. Journal of Economic Behavior and Organization 70:498–507.CrossRefGoogle Scholar
Hartman, R., Doane, M.J., and Chi-Keung, W. 1991. Consumer rationality and the status quo, quarterly. Journal of Economics 106:141–162.Google Scholar
Holt, C.A. and Laury, S.K. 2002. Risk aversion and incentive effects. American Economic Review 92:1644–1655.CrossRefGoogle Scholar
Ihli, H.J., Maart, S.C., and Musshoff, O. 2014. Does timing matter? A real options experiment to farmers’ investment and disinvestment behaviours. Australian Journal of Agricultural and Resource Economics 58:430–452.CrossRefGoogle Scholar
Isik, M. and Khanna, M. 2003. Stochastic technology, risk preferences, and adoption of site-specific technologies. American Journal of Agricultural Economics 85:305–317.CrossRefGoogle Scholar
Jianakoplos, N.A. and Bernasek, A. 1998. Are woman more risk averse. Economic Inquiry 36:620–630.CrossRefGoogle Scholar
Kahneman, D. 2003. A psychological perspective on economics. American Economic Review 93:162–168.CrossRefGoogle Scholar
Kaplan, E.L. and Meier, P. 1958. Nonparametric estimation from incomplete observations. Journal of the American Statistical Association 53:457–481.CrossRefGoogle Scholar
Kiefer, N.M. 1988. Economic duration data and hazard functions. Journal of Economic Literature 26:646–679.Google Scholar
Knight, J., Weir, S., and Woldehanna, T. 2003. The role of education in facilitating risk-taking and innovation in agriculture. Journal of Development Studies 39:1–22.CrossRefGoogle Scholar
Koesling, M., Flaten, O., and Lien, G. 2008. Factors influencing the conversion to organic farming in Norway. International Journal of Agricultural Resources, Governance and Ecology 7:78–95.CrossRefGoogle Scholar
Kuminoff, N.V. and Wossink, A. 2010. Why isn't more US farmland organic? Journal of Agricultural Economics 61:240–258.CrossRefGoogle Scholar
Läpple, D. 2010. Adoption and abandonment of organic farming: An empirical investigation of the Irish drystock sector. Journal of Agricultural Economics 61:697–714.CrossRefGoogle Scholar
Läpple, D. 2013. Comparing attitudes and characteristics of organic, former organic and conventional farmers: Evidence from Ireland. Renewable Agriculture and Food Systems 28:329–337.CrossRefGoogle Scholar
Läpple, D. and Kelly, H. 2013. Understanding the uptake of organic farming: Accounting for heterogeneities among Irish farms. Ecological Economics 88:11–19.CrossRefGoogle Scholar
Levitt, S.D. and List, J.A. 2007. What do laboratory experiments measuring social preferences reveal about the real world? Journal of Economic Perspectives 21:153–174.CrossRefGoogle Scholar
Maart-Noelck, S.C. and Musshoff, O. 2013. Investing today or tomorrow? An experimental approach to farmers’ decision behavior. Journal of Agricultural Economics 64:295–318.CrossRefGoogle Scholar
Maart-Noelck, S.C., Musshoff, O., and Maack, M. 2013. The impact of price floors on farmland investments: A real options based experimental analysis. Applied Economics 45:4872–4882.CrossRefGoogle Scholar
Maeder, P., Flieβbach, A., Dubois, D., Gunst, L., Fried, P., and Niggli, U. 2002. Soil fertility and biodiversity in organic farming. Science 296:1694–1697.CrossRefGoogle Scholar
Masclet, D., Colombier, N., Denant-Boemont, L., and Lohéac, Y. 2009. Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers. Journal of Economic Behavior and Organization 70:470–484.CrossRefGoogle Scholar
McCann, E., Sullivan, S., Erickson, D., and De Young, R. 1997. Environmental awareness, economic orientation, and farming practices: A comparison of organic and conventional farmers. Environmental Management 21:747–758.CrossRefGoogle ScholarPubMed
Mzoughi, N. 2011. Farmers adoption of integrated crop protection and organic farming: Do moral and social concerns matter? Ecological Economics 70:1536–1545.CrossRefGoogle Scholar
Oprea, R., Friedman, D., and Anderson, S.T. 2009. Learning to wait: A laboratory investigation. Review of Economic Studies 76:1103–1124.CrossRefGoogle Scholar
Peterson, H.H., Barkley, A., Chacón-Cascante, A., and Kastens, T.L. 2012. The motivation for organic grain farming in the United States: Profits, lifestyle, or the environment? Journal of Agricultural and Applied Economics 44:137–155.CrossRefGoogle Scholar
Roe, B.E. and Just, D.R. 2009. Internal and external validity in economics research: Tradeoffs between experiments, field experiments, natural experiments, and field data. American Journal of Agricultural Economics 91:1266–1271.CrossRefGoogle Scholar
Samuelson, W. and Zeckhauser, R. 1988. Status quo bias in decision making. Journal of Risk and Uncertainty 1:7–59.CrossRefGoogle Scholar
Schemper, M., Wakounig, S., and Heinze, G. 2009. The estimation of average hazard ratios by weighted Cox regression. Statistics in Medicine 28:2473–2489.CrossRefGoogle ScholarPubMed
Schmitt, H. and Polzin, Y. 2004. Kostenvergleich beim Bau von Mastschweineställen [Comparison of costs for the building of hog fattening barns]; Available at Web site https://www.landwirtschaft-bw.info/pb/MLR.Landwirtschaft,Len_US/Startseite/Tierhaltung+_+Tierzucht/Oekonomik_Schweine?SORTK=Symbol+f%C3%BCr+Dateityp&REVERSEK=true Google Scholar
Schramek, J. and Schnaut, G. 2004. Motive der (Nicht-)Umstellung auf Öko-Landbau [Motives for the (non) conversion to organic farming]. Ökologie und Landbau 131:44–45.Google Scholar
Scialabba, N.E.H. and Müller-Lindenlauf, M. 2010. Organic agriculture and climate change. Renewable Agriculture and Food Systems 25:158–169.CrossRefGoogle Scholar
Statistisches Bundesamt 2011. Land- und Forstwirtschaft, Fischerei- Betriebe mit ökologischem Landbau, Landwirtschaftszählung/Agrarstrukturerhebung 2010. Statistisches Bundesamt, Wiesbaden.Google Scholar
Thijssen, G. 1996. Farmers’ investment behavior: An empirical assessment of two specifications of expectations. American Journal of Agricultural Economics 78:166–174.CrossRefGoogle Scholar
Uematsu, H. and Mishra, A.K. 2012. Organic farmers or conventional farmers: Where's the money? Ecological Economics 78:55–62.CrossRefGoogle Scholar
Viscusi, W.K., Phillips, O.R., and Kroll, S. 2011. Risky investment decisions: How are individuals influenced by their groups? Journal of Risk and Uncertainty 43:81–106.CrossRefGoogle Scholar
Willock, J., Deary, I.J., McGregor, M.J., Sutherland, A., Edwards-Jones, G., Morgan, O., Dent, J.B., Grieve, R., and Gibson, G.J. 1999. The role of attitudes and objectives in farmer decision making: Business and environmentally-oriented behaviour in Scotland. Journal of Agricultural Economics 50:286–303.CrossRefGoogle Scholar
Zerger, U., Löser, R., Rasch, H., Deerberg, F., Volling, O., Ebert, U., Puffert, M., and Kemptkens, K. 2010. Further Development of a Nation-Wide Consultant-Practice-Network for Knowledge and Techniques Transfer for the Sections Interfarm Comparisons and Farmbranch Analysis. Stiftung Ökologie und Ökolandbau, Bad Dürkheim.Google Scholar
Supplementary material: PDF

Hermann supplementary material

Appendix

Download Hermann supplementary material(PDF)
PDF 55.4 KB