Abstract

Multi-functionality and the provision of eco-system services are politically highly prioritised aspects of farming. This study uses a Symmetric Generalised McFadden cost function to analyze the relationship between costs of production and the provision of biodiversity for Swedish milk farms. Biodiversity indicators are based on the number of valuable plant species present at the farm and are modeled as an output in the cost function. The results show that the marginal cost of biodiversity increases with higher provision, and that an increased provision of biodiversity also increases the costs of market commodities such as milk and beef. The upward slope of the marginal cost of biodiversity and its competitive relationship with market goods questions the efficiency of support schemes based on voluntary programmes with a flat-rate per hectare compensation. Instead, the results support targeted environmental policy schemes with zonings and/or the use of biodiversity indicators.

Keywords

Biodiversity; marginal cost; dairy; environmental support

Published in

Journal of Agricultural Economics
2014, Volume: 65, number: 1, pages: 87-111
Publisher: WILEY-BLACKWELL

SLU Authors

• Waldo, Staffan

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Economics


Publication identifier

DOI: https://doi.org/10.1111/1477-9552.12028

Permanent link to this page (URI)

https://res.slu.se/id/publ/60434